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Allergan (AGN) Q4 Earnings: What's in Store for the Stock?

Allergan plcAGN will be reporting fourth-quarter 2016 earnings on Feb 8, before the market opens. Last quarter, the company delivered a negative earnings surprise of 7.00%.

Allergan's share price was up 9.1% this year so far, while the Zacks classified Medical-Generics Drug industry witnessed a 2.1% decline.

Allergan's earnings performance has been mixed so far, with the company beating expectations in three of the past four quarters and missing on one occasion. The average negative earnings surprise over the last four quarters is 0.50%.

Allergan PLC. Price and EPS Surprise

Allergan PLC. Price and EPS Surprise | Allergan PLC. Quote

Let's see how things are shaping up for this announcement.

Factors to Consider

We believe that Allergan's revenues will be driven by product launches, international growth and performance of key established products like Botox, Linzess and Restasis. On the other hand, earnings growth will be driven by the top line, operating expense management and a lower share count.

Performance of new products like Avycaz (complicated intra-abdominal and urinary tract infections in adult patients), Vraylar (bipolar I disorder and schizophrenia), Kybella (double chin) and Viberzi (irritable bowel syndrome with diarrhea in adults) will be in focus. Viberzi, Dalvance and Vraylar did well in the third quarter and we expect the trend to continue in the fourth quarter.

However, Namenda IR is facing generic competition which will continue to hurt its sales. Investors should also be interested in Namzaric's performance. Namzaric is a once-daily, fixed-dose combination of Namenda XR and Aricept. Meanwhile, Asacol/Delzicol sales will continue being hurt by sluggish demand for Ascaol HD following the launch of an authorized generic in Aug 2016.

On the flip side, Allergan has made many acquisitions in the past few months including Tobira Therapeutics, RetroSense Therapeutics, Chase Pharma, ForSight VISION5 and Vitae Pharmaceuticals. These acquisitions should add to its top line in the fourth quarter.

Allergan sold its generics and Anda distribution business to Teva Pharmaceutical Industries Limited TEVA in Aug and Oct 2016, respectively. Both these business lines will be treated as discontinued operations.

Meanwhile, higher costs will continue to put pressure on profits.

Earnings Whispers

Our proven model does not conclusively show that Allergan 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) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Most Accurate estimate stands at $3.75, while the Zacks Consensus Estimate is pegged higher at $3.76. This results in an Earnings ESP of -0.27%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Allergan's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

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

Stocks to Consider

Some stocks in the healthcare sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

Acorda Therapeutics, Inc. ACOR is expected to release results on Feb 14. The company has an Earnings ESP of 5.56% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Kite Pharma, Inc. KITE has an Earnings ESP of +13.64% and a Zacks Rank #3. The company is expected to release results next month.

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Allergan PLC. (AGN): Free Stock Analysis Report

Acorda Therapeutics, Inc. (ACOR): Free Stock Analysis Report

Kite Pharma, Inc. (KITE): Free Stock Analysis Report

Teva Pharmaceutical Industries Limited (TEVA): Free Stock Analysis Report

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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.

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