The earnings season for the quarter ending September is off to a strong start. Although the momentum has decelerated compared to the first half, it is still encouraging. As of Oct 19, 84 S&P 500 companies reported results.
Per the latest Earnings Preview , total reported earnings were up 19.2% from the year-ago period on 8.4% higher revenues. Among these companies, 82.1% beat earnings estimates and 61.9% surpassed top-line expectations. Overall, S&P 500 revenues and earnings for the third quarter are estimated to increase 7.2% and 19.2%, respectively.
Per the Earnings Trend report, 10 out of 16 Zacks sectors are likely to record double-digit growth in earnings in Q3. The Zacks Medical sector's companies, comprising pharma biotech as well as medical device companies, which have reported so far, constituting more than one-fifth of the sector's market capitalization, show year-over-year growth of 14.4% earnings growth and 10.1% sales growth. However, the estimated numbers for full third-quarter earnings and sales growth for this sector is 8.4% and 6.6%, respectively.
Two of the large pharma companies - Johnson & Johnson JNJ and Novartis NVS - which reported last week beat sales estimates. While J&J also beat earnings estimates, Novartis' earnings matched the same. Biogen BIIB reported strong results, beating estimates on both counts.
The pharma/drug/biotech sectors have been facing issues related to high prices and rising generic/biosimilar competition. However, consistent innovation has brought several new drugs, which helped offset declining sales of many legacy drugs.
Let's take a look at three pharma/biotech companies that are set to report third-quarter results on Oct 25. Let's see how things are shaping up for this quarter.
Merck & Co., Inc.MRK
Merck,which is scheduled to release earnings before the opening bell, delivered a positive earnings surprise of 2.91% last quarter. Merck's earnings beat expectations in all the last four quarters with an average positive surprise of 5.25%.
For this quarter, Merck has an Earnings ESP of -0.30% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate is pegged at $1.16 per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Merck's newer drugs like Keytruda, Gardasil vaccine and Bridion are likely to boost revenues and offset declining sales of diabetes franchise and other key drugs like Zostavax and Zepatier. The label expansions of blockbuster drug, Keytruda, especially in first-line lung cancer, have significantly boosted sales and the trend is likely to continue. Strong demand for Bridion in the United States and launch in China will boost the sales of the drug in the soon-to-be reported quarter. Zostavax is facing competition from Glaxo's Shingrix. Research and development costs is likely to be higher due to development of Lynparza, Lenvima and some early-stage candidates. (Read more: Merck to Report Q3 Earnings: What's in the Cards?)
Merck & Co., Inc. Price and EPS Surprise
Merck & Co., Inc. Price and EPS Surprise | Merck & Co., Inc. Quote
Bristol-Myers Squibb CompanyBMY
Bristol-Myers is scheduled to announceresults before the closing bell.Bristol-Myers beat estimates in three of the past four quarters while missing the same once. The company delivered an average positive earnings surprise of 6.39%.
The company has an Earnings ESP of -0.48% and a Zacks Rank #2 (Buy). The Zacks Consensus Estimate is pegged at earnings of 91 cents per share. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Bristol-Myers' top blockbuster drugs, Opdivo and Eliquis, are likely to drive the company's top-line on the back of strong demand. Label expansion of Opdivo in newer indications including small cell lung cancer has expanded its patient population. However, competitive pressure for Hepatitis C and HIV business and rising operating expenses will hurt the company's top and bottom lines. (Read more: Is a Beat in Store for Bristol-Myers in Q3 Earnings? )
Our previous article showed that the company was likely to beat on earnings. However, estimates changed thereafter, making surprise prediction difficult.
Bristol-Myers Squibb Company Price and EPS Surprise
Bristol-Myers Squibb Company Price and EPS Surprise | Bristol-Myers Squibb Company Quote
Gilead Sciences, Inc.GILD
The company is expected to report after market close. Gilead beat estimates in three of the past four quarters while missing the same once. The company delivered an average positive earnings surprise of 6.43%.
The company has an Earnings ESP of -1.98% and a Zacks Rank #1.The Zacks Consensus Estimate is pegged at $1.66 per share.
Gilead's HCV franchise has been facing competitive and pricing pressure, which resulted in lower sales of its two key drugs in the first half. Total sales of this franchise plunged amid new competition and fewer patient starts. The negative trend is expected to continue in the soon-to-be reported quarter. However, the company's HIV franchise has witnessed strong momentum so far this year on the back of continued uptake of tenofovir alafenamide based products. Genvoya and Truvada from this franchise are likely to be the top drivers and may offset the sales decline in HCV franchise. Gilead is also diversifying its product and pipeline portfolio by foraying into newer technologies and indications. (Read more: Will Gilead HIV Sales Offset HCV Sales Decline in Q3? )
Gilead Sciences, Inc. Price and EPS Surprise
Gilead Sciences, Inc. Price and EPS Surprise | Gilead Sciences, Inc. Quote
Celgene CorporationCELG
The company is expected to report before market open. Celgene delivered an earnings surprise of 2.86% last quarter. Celgene's performance has been encouraging with the company reporting positive surprise in all the last four quarters. The average earnings beat over the last four quarters is 2.38%.
The company has an Earnings ESP of -0.56% and a Zacks Rank #2.The Zacks Consensus Estimate is pegged at $2.25 per share.
Celgene's Revlimid, which is approved in several indications, is likely to be the main growth driver in the to-be reported quarter, driven by expansion in key markets and longer treatment duration. Approval of Pomalyst in combination with Darzalex and dexamethasone for relapsed/refractory myeloma in the United States should propel sales further. Investors expect the company to throw light on the promising candidates in its pipeline. (Read more: What's in Store for Celgene Q3 Earnings? )
Celgene Corporation Price and EPS Surprise
Celgene Corporation Price and EPS Surprise | Celgene Corporation Quote
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Novartis AG (NVS): Free Stock Analysis Report
Johnson & Johnson (JNJ): Free Stock Analysis Report
Merck & Co., Inc. (MRK): Free Stock Analysis Report
Bristol-Myers Squibb Company (BMY): Free Stock Analysis Report
Gilead Sciences, Inc. (GILD): Free Stock Analysis Report
Celgene Corporation (CELG): Free Stock Analysis Report
Biogen Inc. (BIIB): 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.
