Leading molecular diagnostics company – Cepheid (CPHD) is set to report its third-quarter 2014 earnings results on Oct 16. Last quarter, the company had posted a 23.1% positive surprise. Let's see how things are shaping up for this announcement.
Factors at Play
With the overall invitro diagnostic products and services market growing modestly, Cepheid's management is striving hard to expand its market share so as to ensure its leadership position.
Cepheid is currently looking towards expansion of its market reach particularly in the international markets. With the recent successful launch of Xpert Norovirus and Xpert Trichomonas in the international market, Cepheid is expected to gain increased profits from this market in the upcoming quarter.
Considering Cepheid's gamut of tests, the company is susceptible to competitive headwinds. Infact some of its competitors own a larger market share compared with Cepheid in the U.S. and Europe. Thus the competitive landscape for Cepheid might adversely impact the uptake of its offerings in the market . In our opinion, however, a fast-growing molecular diagnostic company like Cepheid is well positioned with multiple test menu expansions in hand, that should act as significant growth catalysts, driving performance levels higher.
For the third quarter of 2014, Cepheid expects total sales in the range of $107–$110 million and loss of 1 cent to earnings of a penny per share, on an adjusted basis. The Zacks Consensus Estimate of $110 million for revenues coincides with the upper limit of the company's guided range. The current Zacks Consensus Estimate of loss of 15 cents lies much lower than the company's guided range.
Earnings Whispers?
Our proven model does not conclusively show that Cepheid is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Srong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Cepheid has a Zacks ESP of 0.00%.That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 16 cents.
Zacks Rank: Cepheid has a Zacks Rank #3 which when combined with a 0.00% ESP makes surprise predictions difficult.
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 revisions.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Edwards Lifesciences Corp. (EW), Earnings ESP of +1.41% and a Zacks Rank #2.
Hologic Inc. (HOLX), Earnings ESP of +5.41% and a Zacks Rank #3.
Heartware International Inc. (HTWR), Earnings ESP of +21.21% and Zacks Rank #3.
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