Markets
MRK

Is Alexion (ALXN) Likely to Disappoint this Earnings Season?

Alexion Pharmaceuticals, Inc.ALXN is scheduled to report fourth-quarter 2015 earnings results on Feb 3, before the opening bell.

The company has posted a positive earnings surprise in one of the trailing four quarters. Let's see how things are shaping up for this announcement.

Soliris to Drive Q4 Results

Soliris is expected to continue performing well in its approved indications - paroxysmal nocturnal hemoglobinuria, and atypical hemolytic uremic syndrome - thereby driving top-line growth. The company is expected to add new patients in the U.S., Europe and Japan. Approval of Kanuma for the treatment of lysosomal acid lipase deficiency and Strensiq as long-term enzyme replacement therapy in patients with pediatric-onset hypophosphatasia to treat the bone manifestations of the disease, should also contribute to revenues. The successful commercialization these drugs will not only boost the company's top line, but also reduce its dependence on a single product for growth.

Meanwhile, results in the fourth quarter will likely suffer from foreign exchange headwinds. While research & development costs are expected to increase due to the company's efforts to develop its pipeline, selling, general and administrative expenses may increase owing to Alexion's marketing efforts for newly approved products.

Although increased operating costs are expected to hurt Alexion's bottom line in the fourth quarter, the company's long-term growth prospects seem bright. We believe that investor focus will remain on updates on the performance of Soliris, Kanuma and Strensiq. Investors are also looking forward to the company's 2016 outlook, which could be issued along with the fourth-quarter results.

What Our Model Indicates

Our proven model does not conclusively show that Alexion is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to likely post an earnings beat. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at -7.96%. This is because the Most Accurate estimate is 81 cents while the Zacks Consensus Estimate is pegged higher at 88 cents.

Zacks Rank: Alexion currently carries a Zacks Rank #3. Although the company's Zacks Rank #3 enhances the predictive power of the ESP, its negative ESP makes a surprise prediction difficult.

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

Stocks that Warrant a Look

Here are a few health care 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.

Gilead Sciences Inc. GILD has an Earnings ESP of +2.75% and a Zacks Rank #1. The company is scheduled to release results on Feb 2.

Cytokinetics, Incorporated CYTK has an Earnings ESP of +6.45% and a Zacks Rank #3. The company is expected to release results on Feb 11.

Merck & Co. Inc. MRK has an Earnings ESP of +1.10% and a Zacks Rank #3. The company is scheduled to report results on Feb 3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MERCK & CO INC (MRK): Free Stock Analysis Report

ALEXION PHARMA (ALXN): Free Stock Analysis Report

GILEAD SCIENCES (GILD): Free Stock Analysis Report

CYTOKINETCS INC (CYTK): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

MRK GILD CYTK ALXN

Other Topics

Earnings Stocks