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Can Gilead (GILD) Keep the Earnings Streak Alive in Q4?

Gilead Sciences Inc.GILD is scheduled to report fourth-quarter 2015 results on Feb 2. Gilead's earnings track record has been pretty good so far. Last quarter, the company delivered a positive earnings surprise of 5.28%. In fact, Gilead has posted a positive earnings surprise in each of the trailing four quarters, with an average beat of 5.91%. Let's see how things are shaping up for this announcement.

What to Expect from Q4 Results?

Gilead's blockbuster hepatitis C virus (HCV) treatments are expected to continue to contribute meaningfully to the company's top line in the fourth quarter. Other anti-viral products, such as the single-tablet HIV treatments, Complera/Eviplera and Stribild, should also keep up their performance.

However, Atripla revenues are expected to continue declining. Gilead's HCV drugs have been witnessing a slowdown in sales. In the third quarter of 2015, Sovaldi sales plunged 47.6% year over year owing to the availability of newer HCV therapies like Harvoni and AbbVie Inc.'s ABBV Viekira Pak, among others. Harvoni also witnessed a sequential fall in revenues due to a gradual decrease in demand from the retail market during the quarter.

However, Harvoni sales could benefit from the label expansion this quarter. With the label expansion, Harvoni can now be used for the treatment of patients with chronic HCV genotypes 4, 5 and 6 infection, and in patients co-infected with HIV. Additionally, Harvoni, in combination with ribavirin as a 12-week regimen, was approved as an alternate therapy to 24 weeks of Harvoni for treatment-experienced genotype 1 patients with cirrhosis.

Gilead expects product sales in the range of $30-$31 billion. We could see an update on the guidance based on the company's fourth-quarter performance. Meanwhile, the company is also actively pursuing share repurchases.

Why a Likely Positive Surprise?

Our proven model shows that Gilead is likely to beat earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to post an earnings beat, and Gilead has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.75%. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Gilead currently carries a Zacks Rank #1.

The combination of Gilead's Zacks Rank #1 and +2.75% ESP makes us reasonably confident of an earnings beat this season.

Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks That Warrant a Look

Apart from Gilead, here are a few health care stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this quarter.

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.

AstraZeneca PLC AZN has an Earnings ESP of +24.32% and a Zacks Rank #2. The company is scheduled to report results on Feb 4.

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ASTRAZENECA PLC (AZN): Free Stock Analysis Report

GILEAD SCIENCES (GILD): Free Stock Analysis Report

CYTOKINETCS INC (CYTK): Free Stock Analysis Report

ABBVIE INC (ABBV): 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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