We expect healthcare services provider Affymetrix Inc. (AFFX) to beat expectations when it reports first-quarter fiscal 2014 operating results on May 1, 2014, after the market closes.
Why a Likely Positive Surprise?
Our proven model shows that Affymetrix is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Expected Surprise Prediction or Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Affymetrix has a Zacks ESP of +50.00%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: Affymetrix carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Affymetrix's Zacks Rank #2 (Buy) and +50.00% ESP makes us confident of a possible positive earnings beat on May 1. It is worth noting that Affymetrix had delivered positive earnings surprises in 2 of its last 4 quarters, with an impressive average beat of 192.86%.
What is Driving the Better-than-Expected Earnings?
In its last reported fourth-quarter 2013, Affymetrix had reported adjusted earnings of 2 cents per share, rebounding from an adjusted loss of 2 cents per share incurred in the same quarter a year ago. However, earnings lagged the Zacks Consensus Estimate by 71.43%.
Moreover, Affymetrix experienced solid year-over-year growth of 9.8% in revenues to $92.6 million. This hike in total revenues can be attributable to increased CytoScan and Axiom revenues in the company's Genetic Analysis business units.
Fourth-quarter adjusted operating expenses dropped 1.2% year over year to $47.9 million, primarily driven by lower headcount following the restructuring announced on Jan 11, 2013.
Based on its encouraging performance in the past quarter, Affymetrix expects to generate revenues of approximately $335 million in 2014. The company also expects EBITDA to hover in the range of 12-13% in 2014.
Other Stocks to Consider
Affymetrix is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 industry peers:
Myriad Genetics Inc. (MYGN), earnings ESP of +10.87% and a Zacks Rank #1 (Strong Buy).
Alexion Pharmaceuticals, Inc. (ALXN), earnings ESP of +5.56% and a Zacks Rank #1 (Strong Buy).
Gilead Sciences Inc. (GILD), earnings ESP of +17.32% and a Zacks Rank #1 (Strong Buy).
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