Celgene Corporation (CELG) is set to report second quarter 2014 results on Jul 24 before market opens. Last quarter, the company had delivered an earnings surprise of 2.82%. Let’s see how things are shaping up for this announcement.
Factors at Play
Celgene has delivered positive earnings surprises in two of the last four quarters with an average beat of 2.54%. Celgene’s net product sales are expected to rise in the second quarter. Products like Revlimid and Abraxane should continue performing well.
Meanwhile, Vidaza sales will remain under pressure due to soft demand in the U.S. (resulting from generic competition). Moreover, results will be affected by higher operating costs as Celgene continues to develop its pipeline. Celgene’s efforts to market Pomalyst/ Imnovid and Otezla effectively will also push operating costs higher. Otezla was approved in the U.S. earlier in the year for the treatment of adults suffering from active psoriatic arthritis.
Why a Likely Positive Surprise?
Our proven model conclusively shows that Celgene is likely to beat earnings this quarter because it has the right combination of two key ingredients.
Positive Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.60%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.
Zacks Rank #2 (Buy): Note that stocks with a Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings estimates. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision momentum.
The combination of Celgene’s Zacks Rank #2 and an ESP of +2.60% makes us confident of an earnings beat this season.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that they have the right combination of elements, i.e., a positive Earnings ESP and a Zacks Rank #1, #2 or #3:
Endo International (ENDP) has an Earnings ESP of +4.49% and holds a Zacks Rank #2. Endo will be reporting second quarter earnings on Jul 31 before market opens.
Hospira Inc. (HSP) has an Earnings ESP of +1.79% and holds a Zacks Rank #1 (Strong Buy). Hospira will be reporting second quarter earnings on Jul 30 before market opens.
Teva Pharmaceutical Industries Limited (TEVA) has earnings ESP of +6.67% and holds a Zacks Rank #2. Teva will report second quarter earnings on Jul 31 before market opens.
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