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What's in the Cards for Perrigo (PRGO) This Earnings Season?

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Perrigo Company plc (PRGO - Free Report) is expected to report third-quarter 2018 results before the opening bell on Nov 8.

Perrigo’s earnings history has been quite impressive with the company surpassing expectations in all the last four quarters, with the average beat being 10.24%. In the last reported quarter, the company delivered a positive surprise of 0.83%.

Shares of the company have lost 17.2% so far this year compared with the industry’s decrease of 0.8%.

Let’s see how things are shaping up for the upcoming announcement.

Factors Likely to Influence Results

On its second-quarter earnings call, Perrigo lowered its outlook for 2018 especially due to lower expectations for Prescription Pharmaceuticals (Rx) segment. Moreover, all of the three segments reported an organic decline in sales in the second quarter. However, new products brought higher sales.

Perrigo is currently focused on the growth strategy of Consumer Healthcare Americas segment through switching of prescription drugs to over-the-counter (“OTC”) brands and expanding store brand solution.

In September, the FDA approved a stored brand OTC equivalent of J&J’s multi-symptom relief drug, Imodium. In August, the company entered into an agreement with Merck (MRK - Free Report) to gain exclusive rights to the OTC version of the latter’s allergy drug, Nasonex nasal spray. The branded and generic versions of the drug generated a total of $214 million in the year ending June 2018. We expect the company to provide the launch plans for these OTC drugs on its earnings call.

Moreover, the launch of the OTC version of heartburn drug, Omeprazole Delayed Release, in April is likely to boost sales this quarter.

The new products in the Consumer Healthcare Americas business and Consumer Health Care International segment saw improved sales in the second quarter. However, declining sales at animal health business may offset the gain from new products.

In April 2018, the company also launched the generic version of Bausch & Lomb’s Prolensa to treat postoperative inflammation and reduction of ocular pain in patients who underwent cataract surgery. Additionally, in January, Perrigo received FDA nod for the generic version of Galderma Laboratories’ Epiduo to enable topical treatment of acne vulgaris in patients, aged nine years and above. These product introductions are likely to drive Rx segment sales in the to-be-reported quarter.

Also, the ongoing restructuring initiatives and operating expense discipline are anticipated to cushion the company’s bottom line. In August, the company announced its plan to spin-off its Rx business to create value for shareholders and focus on expanding its leading consumer business. The segment has been facing declining sales due to delay in launch of products and price erosion.

Moreover, currency movement is also expected to unfavorably impact the sales of the CHC segment.

Earnings Whispers

Our proven model does not conclusively show that Perrigo is likely to beat estimates this reporting cycle. This is because a stock needs to have both a positive Earnings ESP and a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($1.01) and the Zacks Consensus Estimate ($1.05) is -3.9%.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Perrigo carries a Zacks Rank #4 (Sell).

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Perrigo Company plc Price and EPS Surprise


Perrigo Company plc Price and EPS Surprise | Perrigo Company plc Quote

Stocks to Consider

Here are some biotech stocks that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.

CRISPR THERAPTC (CRSP - Free Report) has an Earnings ESP of +3.53% and a Zacks Rank #1.  The company is expected to release third-quarter results on Nov 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

Compugen Ltd. (CGEN - Free Report) has an Earnings ESP of +58.33% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Nov 7.

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