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Will Endo Internationa's (ENDP) Beat on Earnings in Q4? - Analyst Blog

Endo International, Inc. ( ENDP ) is scheduled to report its fourth-quarter and full-year 2014 results on Mar 2, 2015.

Endo's track record has been pretty impressive in the first nine months of 2014 with the company beating estimates in three of the last four quarters with an average earnings surprise of 11.4%.

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

Factors at Play This Quarter

Endo, a global specialty health care company, focuses on acquisitions for driving growth. In Aug 2014, Endo had acquired DAVA Pharmaceuticals to strengthen its generic unit. In Feb 2014, Endo had acquired Paladin Labs in a cash-and-stock deal in an attempt to expand and counter declining revenues due to generic competition. These deals have strengthened Endo's portfolio substantially.

The generic business in the U.S. continues to perform well and we expect the momentum to continue through the fourth quarter as well. Concurrent with its third-quarter results, Endo increased its guidance for 2014. The company now expects earnings per share for 2014 in the range of $4.10 to $4.25 (old guidance: $4.00 to $4.20 per share). The company also increased its revenue guidance by $20 million to $2.80 billion to $2.88 billion (old guidance: $2.78 billion to $2.86 billion).

The new annual guidance implies moderate top-line growth in the fourth quarter. Generic revenues in the U.S. will be impacted by the company's decision to follow market dynamics and adjust prices within the controlled substances portfolio. Consequently, the company expects to increase its rebate reserves in the fourth quarter.

Loss of exclusivity for Lidoderm and Opana ER will impact sales but management expects prudent capital deployment and organic growth to offset the impact of the same.

Expenses are expected to be slightly higher in the fourth quarter compared to the third quarter due to the timing of certain marketing and selling expenses, as well as higher R&D expenses related to the pipeline development.

Last month, the company completed its acquisition of erstwhile Auxilium Pharmaceuticals for $2.6 billion. The Auxilium Pharma acquisition will boost Endo's portfolio with products like Xiaflex (Dupuytren's contracture and Peyronie's disease), Testopel (testosterone replacement therapy) and Stendra (erectile dysfunction). We expect further updates on the same.

Earnings Whispers?

Our proven model shows that Endo 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) for this to happen, as it is in this case.

Zacks ESP : The Earnings ESP for Endo is 0.89%. This is because both the Most Accurate Estimate currently stands at $1.14 while the Zacks Consensus Estimate is pegged at $1.13.

Zacks Rank: Endo carries a Zacks Rank #2, which when combined with a positive ESP makes us confident of an earnings beat.

However, we caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks You May Consider

Here are some other companies you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this season.

Amarin Corporation plc ( AMRN ) has an Earnings ESP of +14.29% and carries a Zacks Rank #2. The company is scheduled to release its fourth-quarter 2014 results on Mar 3.

Mylan ( MYL ) has an Earnings ESP of +2.89% and carries a Zacks Rank #3. It is expected to report its fourth-quarter results on Mar 2.

Radius Health ( RDUS ) has an Earnings ESP of 5.00% and carries a Zacks Rank #3. It is expected to report its fourth-quarter results on Mar 10.

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ENDO INTL PLC (ENDP): Free Stock Analysis Report

MYLAN INC (MYL): Free Stock Analysis Report

AMARIN CORP PLC (AMRN): Free Stock Analysis Report

RADIUS HEALTH (RDUS): 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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