How is the Earnings Picture Evolving now that a large part of the first-quarter 2016 earnings season has come through with 87.2% (as of May 6) of the S&P 500 members having already reported results? This season is likely to finish as the fourth straight quarter of earnings declines for the S&P 500 index. Moreover, this trend of earnings declines is expected to continue into the second quarter as well.
With several pharma and major biotech companies having released their earnings results, our Q1 scorecard shows that 92.5% of the Medical sector has reported results with a blended beat of 65.3% (the percentage of companies that have beaten both EPS as well as revenue estimates).
Notably, the Medical sector is anticipated to be one of the seven sectors to record earnings growth in the first quarter of 2016, as per our Earnings Trends report.
The earnings picture for both the pharma and the biotech sector looks pretty mixed with beats and misses. While in the biotech sector, Amgen Inc. AMGN topped first-quarter earnings and revenues and even raised the outlook for the year, another well-known biotech name Gilead lagged both earnings and revenue estimates even though it kept its outlook for the year intact. Among the other biotech stocks, Biogen, Celgene, Alexion and AbbVie managed to post mixed results, while some others came up with disappointing results and outlook for the year.
Pharma giants like Johnson & Johnson JNJ , Pfizer and Bristol-Myers Squibb surpassed first-quarter earnings and revenue expectations and also raised the outlook for the year. Eli Lilly raised its outlook for the year despite an earnings miss while Glaxo expects core earnings growth of 10-12% at constant exchange rate in 2016.
With several medium and small-sized drug companies still to report first-quarter 2016 results, let's see what awaits these drug stocks when they report their first-quarter results on May 10.
What Awaits these Drug Stocks?
Jazz Pharmaceuticals plcJAZZ , a biopharmaceutical company, has a portfolio of offerings targeting sleep and hematology/oncology disorders. Focus will be on the performance of marketed products including Xyrem, Defitelio and Erwinaze among others along with that of commercialization plans for Defitelio in the U.S., and the company's business development plans. Jazz's Earnings ESP of +6.11% and a Zacks Rank #3 (Hold) make us confident of an earnings beat this quarter (read more: Jazz Q1 Earnings: A Beat in the Cards for the Stock ).
Palo Alto, CA-based Anacor Pharmaceuticals, Inc.ANAC is a biopharmaceutical company focused on the discovery, development and commercialization of small-molecule therapeutics derived from its boron chemistry platform. Anacor's track record so far has been mixed with the company missing estimates in two of the trailing four quarters with an average negative surprise of 16.68%. The company's Zacks Rank #4 (Sell) when combined with an ESP -32.35% makes a beat difficult to predict this quarter.
Intrexon Corporation 's XON Zacks Rank #3 increases the predictive power of the ESP but its current ESP of -6.90% makes a surprise prediction difficult this quarter. Previously our model had shown that Intrexon is likely to beat estimates this quarter (read more: Intrexon: Stock Likely to Beat Estimates in Q1 Earnings ). Intrexon, a leader in the synthetic biology field, follows a business model under which it commercializes its technologies through exclusive channel collaborations and licensing agreements. The company's performance has been mixed over the four trailing quarters with the company beating estimates in two of them.
Oncology focused ARIAD Pharmaceuticals Inc. 's ARIA performance has been far from impressive with the company missing expectations in each of the last four quarters. ARIAD has a Zacks Rank #5 (Strong Sell) which when combined with an ESP of 0.00% makes a surprise prediction difficult (read more: ARIAD to Report Q1 Earnings: Will the Stock Surprise? ).
Iclusig, a leukemia drug, is this biotech company's sole marketed product. The drug's sales should be driven by continued demand, new patient additions and launch in additional territories. Meanwhile, the company is also working on achieving cost efficiencies and resource reallocation, which is a part of its ongoing strategic review. Focus will be on the performance of Iclusig and strategic plans.
Being a development-stage biopharmaceutical company with a focus on neuromuscular and neurological diseases and disorders, Catalyst Pharmaceuticals, Inc.CPRX does not have any approved product in its portfolio. Currently, Catalyst has three candidates under development - Firdapse, CPP-115 and CPP-109. In this scenario, investor focus will be on pipeline and regulatory updates. Catalyst has a pretty good track record with the company beating estimates on three occasions, while posting in line results in one. Though Catalyst's Zacks Rank #3 increases the predictive power of the ESP, the company's 0.00% ESP makes a surprise prediction difficult (read more: What's in the Cards for Catalyst in Q1 Earnings? ).
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