The Q2 earnings season is past the halfway mark. Earnings surprise trends appear to be encouraging except for a few high profile negative surprises from the likes of Facebook and Netflix. The positive momentum of the last few quarters continues as earnings growth approaches first-quarter levels, riding on solid revenues. This week is turning out to be a busy one with almost 1000 companies, including 139 S&P 500 members, coming up with reports.
Story So Far
As of Jul 27, 265 S&P 500 companies reported earnings, accounting for about two-third of the total market capitalization of the index. According to the latest Earnings Preview, total earnings of these companies are up 23.6% from the same period last year on 10.1% higher revenues. Meanwhile, 80.8% of these companies surpassed earnings estimates, while 72.1% beat revenue estimates.
Please note that the broader Medical sector (includes drug, biotech as well as Medical Device companies) is expected to record year-over-year growth of 13.2% in earnings, partly on the back of 6.9% growth in revenues in the second quarter.
Several pharma/biotech bigwigs reported second-quarter results last week. Eli Lilly and Celgene beat estimates for both earnings and sales and also raised their outlook for 2018. Glaxo, Allergan, AstraZeneca and Bristol-Myers beat estimates for earnings and sales. Biogen reported strong sequential growth in key drugs, which helped it beat expectations on both counts.
Pfizer, Inc. (PFE - Free Report) and Sanofi (SNY - Free Report) , which reported earlier this week beat estimates for earnings. While Sanofi missed revenue estimates, Pfizer beat the same. Moreover, Pfizer, which reversed its price hike move recently, posted strong earnings growth and also raised its earnings outlook for 2018.
Here we have five other pharma/biotech companies, which are scheduled to release their second-quarter earnings on Aug 2. Let's see how things are shaping up for these announcements.
Zoetis Inc. (ZTS - Free Report)
The pharma company, which mainly has veterinary products in its marketed portfolio, has an impressive record of earnings surprises. The company’s earnings surpassed expectations in three of the previous four quarters and matched the same once. The average positive earnings surprise for the last four quarters is 3.72%. The Zacks Consensus Estimate for earnings for the second quarter is pegged at 71 cents.
Our proven model provides some idea about the stocks that are about to release their earnings results. Per our model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our proven model does not conclusively show that Zoetis is likely to beat on earnings this quarter. This is because the company carries a Zacks Rank #3 and has an Earnings ESP of -0.10%.
Two key products – Apoquel and Cytopoint – are expected to be major revenue drivers during the second quarter. Moreover, oral parasite, Simparica is expected to gain a higher market share. This should drive revenues higher. Meanwhile, to boost its animal health diagnostics portfolio, the company is acquiring Caifornia-based Abaxis. (Read more: Zoetis Gears Up for Q2 Earnings: What's in Store?)
Regeneron Pharmaceuticals, Inc. (REGN - Free Report)
The biotech company mainly earns revenues from the sale of its retinal drug, Eylea, in the United States and collaboration revenues from its partners. In the last reported quarter, Regeneron beat earnings expectations by 4.47%. In the last four quarters, it surpassed earnings estimates on all occasions, with an average beat of 12.02%. The Zacks Consensus Estimate for earnings for the second quarter is pegged at $4.74.
Our proven model does not conclusively show that Regeneron is likely to beat on earnings this quarter. This is because the company carries a Zacks Rank #2 and has an Earnings ESP of -0.11%.
Eylea’s impressive performance is expected to continue in the second quarter. Meanwhile, Regeneron is focused on expanding Eylea’s label into additional indications. Apart from Eylea’s performance and label expansion efforts, strong uptake of new drugs — Kevzara and Dupixent – announced by partner Sanofi will also boost royalty revenues. (Read more: Regeneron to Report Q2 Earnings: What's in the Cards?)
BioMarin Pharmaceutical Inc. (BMRN - Free Report)
This biotech company mainly focuses on pediatric patients with orphan disease and has six marketed drugs. The company has a mixed record of earnings surprises. BioMarin’s earnings surpassed expectations in two of the last four quarters and missed expectations in the remaining two, resulting in an average positive surprise of 42.37%. In the last reported quarter, the company delivered a negative earnings surprise of 15.38%. The Zacks Consensus Estimate for earnings for the second quarter is pegged at 17 cents.
Our proven model does not conclusively show that BioMarin is likely to beat on earnings this quarter. This is because the company carries a Zacks Rank #3 and has an Earnings ESP of -6.67%.
The company’s top line is mainly driven by two key drugs – Vimizim and Kuvan. This is expected to continue in the second quarter. Robust patient growth and penetration should propel the drugs’ sales. Moreover, Brineura has shown impressive growth since its launch last year. In June, the company also received a milestone payment of $20 million from Pfizer related to submission of regulatory applications seeking approval for talazoparib. (Read more: BioMarin to Report Q2 Earnings: What's in the Cards?)
Alnylam Pharmaceuticals, Inc. (ALNY - Free Report)
This biopharmaceutical company has a mixed earnings surprise record. Alnylam has missed earnings expectations twice and beat the same twice in the last four quarters with an average positive earnings surprise of 3.13%.
The company carries a Zacks Rank #4 and has an Earnings ESP of -2.43%.
With no approved products, the company earns revenues from its collaboration agreements with other pharma companies. The company is progressing well with its RNAi therapeutic candidate, patisiran. Regulatory applications seeking approval of the candidate for the treatment of hereditary ATTR amyloidosis with polyneuropathy is under review in the United States and Europe. A decision is expected this month in the United States. Apart from patisiran, the company has other RNAi candidates – lumasiran and givosiran – which were also successful in early stage studies during the quarter. Investor focus is expected to remain on commercialization plans following a potential approval for patisiran on the earnings call.
Ultragenyx Pharmaceutical Inc. (RARE - Free Report)
The small-biotech company has two approved drugs in its portfolio including recently launched Crysvita in the United States. Ultragenyx earnings surpassed expectations in two of the last four quarters, met it once and missed expectations once, resulting in an average positive surprise of 47.6%. In the last reported quarter, the company delivered a positive earnings surprise of 203.33%. The Zacks Consensus Estimate for the second quarter is pegged at a loss of $2.10.
Our proven model does not conclusively show that Ultragenyx is likely to beat on earnings this quarter. This is because the company carries a Zacks Rank #1 and has an Earnings ESP of -2.04%.
The launch of Crysvita in April should boost product sales in the second quarter. We expect investors to remain focused on updates about progress of its lead pipeline candidate, UX007.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>