We expect GW Pharmaceuticals plcGWPH to beat expectations when it reports its fiscal second-quarter 2018 results, expectedly on May 8.
GW Pharma's share price has increased 0.7% so far this year compared with the industry 's gain of 2.2% in the same time frame.
Factors at Play
GW Pharma derives revenues from the sale of its sole commercial drug, Sativex, which is marketed outside the United States for the treatment of spasticity due to multiple sclerosis. The company is conducting studies for approval of the drug in the United States. The drug is expected to continue the growth trend of the past several quarters this time around as well.
The company has made significant progress with its lead cannabinoid pipeline candidate, Epidiolex for the treatment of Lennox-Gastaut syndrome ("LGS") and Dravet syndrome. The candidate is under review in both the United States and Europe. The company is gearing up for a launch, following potential approval in mid-2018, which will likely increase operating expenses.
Two other studies are evaluating the candidate in tuberous sclerosis complex and infantile spasms. In February 2018, the European Medical agency granted orphan drug status to the candidate for the treatment of tuberous sclerosis complex.
However, the company announced in February that another pipeline candidate, GWP42006 ("CBVD") failed in a phase II study evaluating it in patients with focal seizures, a type of epilepsy. However, the company will continue to develop the candidate in autism spectrum disorders and will explore its potential in the field of epilepsy.
Investors are expected to focus on the company's commercialization plan for Epidiolex upon potential approval at the upcoming earnings release.
GW Pharma's performance over the last four quarters has been disappointing, with the company missing the Zacks Consensus Estimate in all the last four quarters. The average negative surprise over the last four quarters is 19.67%. In the last reported quarter, the company delivered a negative earnings surprise of 19.70%.
Why a Likely Positive Surprise?
Our proven model shows that GW Pharma is likely to beat estimates this quarter. This 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 be able to beat estimates. But that is not the case here, as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate (loss of $2.04) and the Zacks Consensus Estimate (loss of $2.22), stands at +8.11%. This is a leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: GW Pharma currently has a Zacks Rank #2. The combination of a positive Earnings ESP and a favorable Zacks Rank makes us reasonably confident of an earnings beat.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
GW Pharmaceuticals PLC Price and EPS Surprise
Other Stocks That Warrant a Look
Here are some biotech stocks that you may also want to consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter.
Emergent Biosolutions Inc. EBS has an Earnings ESP of +61.8% and a Zacks Rank #3. The company is scheduled to release first quarter results on May 3. You can see the complete list of today's Zacks #1 Rank stocks here .
Vanda Pharmaceuticals Inc. VNDA has an Earnings ESP of +25% and a Zacks Rank #2. The company is scheduled to release first-quarter results on May 2.
Adverum Biotechnologies, Inc. ADVM has an Earnings ESP of +6.9% and currently carries a Zacks Rank #3. The company is expected to release first-quarter results on May 8.
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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.