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Gilead (GILD) Up 2.1% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Gilead Sciences, Inc. (GILD - Free Report) . Shares have added about 2.1% in that time frame.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Gilead Tops Q2 Earnings & Revenue Estimates

Gilead reported results for the second quarter wherein both earnings and revenues surpassed expectations.

Second-quarter 2017 earnings (including the impact of stock-based compensation expenses) of $2.56 per share beat the Zacks Consensus Estimate of $2.18. However, earnings were below the year-ago quarter figure of $3.08.

Moreover, total revenue in the reported quarter was $7.1 billion and topped the Zacks Consensus Estimate of $6.4 billion. However, revenues declined 8.2% year over year.

HIV Impresses Yet Again

Product sales came in at $7.0 billion, down 9% year over year. The decline was due to lower hepatitis C virus (HCV) sales, partially offset by higher sales across HIV and other therapeutic areas.

Antiviral product sales, which include Gilead's HIV and liver disease portfolios, came in at $6.4 billion in the reported quarter, down 9.8%.

HCV product sales, which include Harvoni, Sovaldi and the recently launched Epclusa, were $2.9 billion, down from $4.0 billion reported in the year-ago quarter. The downside was mainly attributed to lower sales of Harvoni and Sovaldi across all major markets, partially offset by sales of Epclusa (launched in 2016) across various locations.

Sales of Harvoni declined 46.1% year over year to $1.4 billion in the reported quarter. The decline was mainly due to lower sales in the U.S and Europe. Further, Sovaldi sales recorded a steep year-over-year decline of 76.8% to $315 million.

Epclusa garnered sales of $1.2 billion in the reported quarter, lower than the prior-quarter figure of $892 million. We note that Epclusa was launched in the U.S. and Europe in June and Jul 2016, respectively.

Meanwhile, HIV and HBV product sales came in at $3.6 billion, up 16.1% year over year. The increase was primarily driven by continuous strong uptake of tenofoviral afenamide (TAF)-based products such as Genvoya, which generated sales of $857 million, up from $302 million in the year-ago quarter, Descovy, which recorded sales of $286 million, up from $61 million, and Odefsey, which registered sales of $258 million, up from $58 million.

HIV treatments like Stribild and Complera/Eviplera sales declined. Viread sales were up at $300 million, up 4.5%. Atripla sales tanked 29.4% to $475 million, while Truvada sales fell 13.8% to $812 million.

Other products like Letairis, Ranexa, AmBisome and Zydelig recorded sales of $230 million (up 13.3%), $200 million (up 30.7%), $92 million (up 8.2%) and $35 million (down 14.6%), respectively.

Research & development (R&D) expenses declined 41.8% to $864 million due to purchase of Nimbus Apollo, Inc. and an U.S. Food and Drug Administration (FDA) priority review voucher. On the other hand, selling, general and administrative (SG&A) expenses were roughly flat at $897 million. Adjusted product gross margin was 87.3%, up from 91.5% in the year-ago period.

2017 Guidance Updated

Based on a better-than-expected performance in the first half of 2017 specifically in the U.S, Gilead raised its guidance for 2017. Gilead now expects net product sales in the range of $24.0–$25.5 billion, up from $22.5–$24.5 billion provided earlier. Non-HCV product sales are projected between $15.5 and $16.0 billion (earlier projection: $15 and $15.5 billion). HCV product sales are projected between $8.5 and $9.5 billion (earlier projection: $7.5 and $9.0 billion). Adjusted R&D expenses and adjusted SG&A expenses are now projected in the range of $3.2–$3.4 billion and $3.2–$3.4 billion, respectively. Adjusted product gross margin is expected in the range of 86–88%. Earnings per share are now projected around $0.86 – $0.93 (earlier projection: $0.84 – $0.91).

Dividend and Share Repurchase

Concurrently, Gilead declared a cash dividend of 52 cents per share of common stock for third-quarter 2017. The dividend is payable on Sep 28 to stockholders of record at the close of business on Sep 15. During the second quarter, the company paid cash dividends of $680 million and repurchased 2 million shares for $130 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Gilead Sciences, Inc. Price and Consensus

 

Gilead Sciences, Inc. Price and Consensus | Gilead Sciences, Inc. Quote

VGM Scores

At this time, Gilead's stock has a subpar Growth Score of D, while it is doing a bit better on the momentum front with C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is more suitable for value investors than momentum investors based on our styles scores.

Outlook

The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.




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