The fourth-quarter reporting cycle for the Medical sector has just started. The sector comprises pharma/biotech and medical device companies.
Drug and biotech stocks’ quarterly results are likely to reflect the positive impact of new drug approvals and label expansions of already marketed drugs. However, rising generic competition for legacy drugs may have offset growth of newer drugs.
Per the Earnings Trends report, as of Jan 23, 5.7% of the companies in the Medical sector, constituting nearly 23.7% of the sector’s market capitalization, reported earnings. While two-third of the reported beat earnings estimates, one-third of them beat sales estimates. Earnings are up 4.4% year over year on 3.9% higher revenues.
Overall, fourth-quarter earnings and sales growth for this sector is expected to be 3.6% and 5.4%, respectively.
Pharma-giant J&J (JNJ - Free Report) reported its earnings for the fourth quarter last week. The company beat estimates for earnings but missed the same for sales. Pharma segment sales were above market expectation despite currency headwinds and the impact of biosimilar and generic competition. Another big player in the pharma segment, Pfizer (PFE - Free Report) reported dismal fourth quarter results earlier this week as it missed estimates on both counts.
Let’s analyze five big pharma/biotech companies that are set to report fourth-quarter 2019 results on Jan 30.
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Multiple-sclerosis drugmaker, Biogen Inc. (BIIB - Free Report) is scheduled to report before market open.
The company’s performance has been impressive so far, with earnings beating estimates in each of the trailing four quarters. It has a four-quarter positive surprise of 9.3%, on average. In the last reported quarter, the company’s earnings beat estimates by 10.88%.
For the quarter to be reported, Biogen has an Earnings ESP of +1.89% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for earnings stands at $7.95 per share.
Sales of Biogen’s multiple sclerosis drugs are likely to have remained flat year over year in the fourth quarter. However, royalties from sales of Roche’s newly launched MS drug, Ocrevus is likely to have contributed significantly to the top line. Patient growth in the United States and volume increase in Europe and Japan for Tecfidera are likely to have been offset by ongoing price decreases in certain European countries. Higher demand for Spinraza and the biosimilars portfolio are likely to have driven revenues. (Read more: Can Biogen Keep the Earnings Streak Alive in Q4?)
Alexion Pharmaceuticals, Inc. (ALXN - Free Report) , which has an impressive track record so far, is also scheduled to report results before market open.
The company beat earnings estimates in each of the trailing four quarters with the average being 12.5%. In the last reported quarter, the company’s earnings beat estimates by 12.05%. For the quarter to be reported, Alexion has an Earnings ESP of +5.97% and a Zacks Rank #2. The Zacks Consensus Estimate for earnings stands at $2.58 per share.
Alexion’s key drugs, Soliris and Ultomiris, are likely to have driven the top line in the fourth quarter. (Read more: Will Soliris, Ultomiris Drive Alexion's Q4 Earnings?)
Vertex Pharmaceuticals (VRTX - Free Report) is scheduled to report results after market close.
In the last reported quarter, the company beat earnings expectations by 7.89%. It has a four-quarter positive surprise of 17.59% on average.
For the quarter to be reported, Vertex has an Earnings ESP of +9.6% and a Zacks Rank #3. The Zacks Consensus Estimate for earnings stands at $1.21 per share.
Vertex’s cystic fibrosis ("CF") drug portfolio has been performing well. The company’s newest CF drug, Symdeko, is likely to have continued its rapid uptake in the fourth quarter. Meanwhile, Vertex’s older two CF medicines Kalydeco (ivacaftor) and Orkambi are expected to have contributed to the company’s top line in the to-be-reported quarter. (Read more: Can CF Drugs Drive Growth for Vertex in Q4 Earnings?)
Eli Lilly and Company (LLY - Free Report) , which has a mixed track record so far, will release results before market open. The company delivered a positive earnings surprise of 3.5% in the last reported quarter. Moreover, it beat on earnings in three of the last four quarters, the average beat being 1.2%.
For the quarter to be reported, Lilly has an Earnings ESP of -0.33% and a Zacks Rank #2. The Zacks Consensus Estimate for earnings stands at $1.52 per share.
Strong demand for Trulicity, Taltz, Jardiance, Basaglar, Olumiant and Verzenio as well as new migraine drug, Emgality is likely to have continued in the fourth quarter. Higher sales of these drugs are likely to have offset decline in sales of established products. However, rising pricing pressure in the United States, price cuts in some international market and currency headwinds are expected to have negatively impacted the top line in the fourth quarter of 2019. (Read more: Lilly to Report Q4 Earnings: What's in the Cards?)
Amgen Inc. (AMGN - Free Report) is scheduled to release results after market close. In the last reported quarter, the company beat earnings expectations by 4.27%. It has a four-quarter positive surprise of 5.82% on average.
For the quarter to be reported, Amgen has an Earnings ESP of -1.47% and a Zacks Rank #3. The Zacks Consensus Estimate for earnings stands at $3.47 per share.
Higher sales of newer products like Prolia, Xgeva, Kyprolis and Blincyto are expected to have made up for softer sales of Amgen’s mature drugs in the fourth quarter. Biosimilars may have continued to be an important contributor to top-line growth driven by the launches of Kanjinti and Mvasi in the United States. However, higher demand for Repatha may have been offset by lower prices. Performance of Aimovig remains to be seen. (Read more: Amgen to Report Q4 Earnings: What's in the Cards?)
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