Key Pharmaceutical Stocks Ready to Deliver Earnings
The year 2014 bodes well for pharmaceutical companies as they leave
the worst of the patent cliff behind and surge ahead on the back of
restructuring activities and new products. The products launched in
2013 and forthcoming launches will help recover a part of the
revenues lost to genericization. Many pharmaceutical companies have
sold their non-core assets - this will drive their focus on its
core business and support growth.
Several companies will continue in-licensing mid-to-late stage
pipeline candidates to save on funds and time.
Although major patent expiries are over, drugs like
(AGN) Restasis (May 2014) and
's (LLY) Evista (Mar 2014) and
' (NVS) Sandostatin LAR (end of 2014) are slated to lose patent
protection this year in U.S.
Though few companies will continue to face challenges, many others
are likely to experience good results. In this light, it is a good
idea to check out the potential of a handful of pharma stocks that
could beat estimates this quarter. An earnings beat will reinforce
investors' confidence in these stocks, leading to rapid price
The Way to Pick Right Stocks
Given the huge number of industry participants, pinpointing stocks
that have the potential to beat estimates may appear to be a
daunting task. One way to narrow down the list of choices during
this earnings season is by looking at stocks that have the
combination of a favorable Zacks Rank - Zacks Rank #1 (Strong Buy),
#2 (Buy) or #3 (Hold) - and a positive Zacks
Earnings ESP is our proprietary methodology for identifying stocks
that have high chances of surprising in their next earnings
announcement. It shows the percentage difference between the Most
Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the
chance of a positive earnings surprise is as high as 70%.
Below are three pharma stocks we believe are best positioned to
stand out this earnings season.
Forest Laboratories Inc.
) is a Zacks Rank #2 (Buy) stock with an earnings ESP of +100%. The
Zacks Consensus Estimate for the third quarter of fiscal 2014 is 4
Based in N.Y., Forest Labs' main products include Namenda
(Alzheimer's disease) and Bystolic (hypertension) among others. In
order to bolster its pipeline, Forest Labs has been entering into
licensing agreements with several companies.
The company has launched a number of new products over the past few
quarters including Namenda XR and Fetzima (major depressive
disorder). The company also raised its earning guidance for fiscal
2014 while reporting second quarter fiscal 2014 results.
Forest Labs is expected to report its third-quarter fiscal
2014 results before the opening bell on Jan 21.
Johnson & Johnson
) is a Zacks Rank #3 (Hold) stock with an earnings ESP of +0.83%.
The Zacks Consensus Estimate for the fourth quarter is $1.20.
Based in N.J., Johnson & Johnson is involved in the
development, manufacturing and marketing of broad range of
healthcare products. Johnson & Johnson's main products include
Remicade, Prezista, Zytiga and Procrit among others. New products
like Xarelto, Zytiga and Invokana will drive growth further. The
company upped its 2013 EPS guidance to $5.44 - $5.49.
Johnson & Johnson is expected to report fourth-quarter and full
year 2013 results on Jan 21.
Ironwood Pharmaceuticals Inc.
) is a Zacks Rank #3 stock with an Earnings ESP of +2.00%. The
Zacks Consensus Estimate for the fourth quarter is a loss of 50
This Cambridge-based company is focused on the development and
commercialization of treatments addressing a variety of diseases
including gastrointestinal diseases, central nervous system
disorders, allergic conditions and cardiovascular disease. Ironwood
Pharma's sole marketed drug, Linzess, is approved for the treatment
of patients suffering from irritable bowel syndrome with
constipation (IBS-C) or chronic idiopathic constipation (CIC).
Ironwood is looking towards cost control initiatives to help reduce
the impact of the increasing Linzess marketing costs.
Ironwood is expected to report fourth-quarter 2013 results on Jan
In the last two quarters, all three companies discussed above have
delivered positive earnings surprises. This nice short-term history
of crushing expectations and a favorable Zacks Rank is an
encouraging sign of a coming beat.
With the pharma industry holding solid growth potential, a sneak
peek into the pharma space for some possible outperformers, backed
by a favorable Zacks Rank and a positive Zacks Earnings ESP, could
be a great way to profit this earnings season.
FOREST LABS A (FRX): Free Stock Analysis Report
IRONWOOD PHARMA (IRWD): Free Stock Analysis
JOHNSON & JOHNS (JNJ): Free Stock Analysis
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