Celgene Corporation (CELG) is scheduled to report third-quarter 2014 results on Oct 23, before the opening bell. In the last reported quarter, Celgene recorded a positive earnings surprise of 3.9%. Let’s see how things are shaping up for this announcement.
Factors to Consider
We expect Celgene to report strong revenues in the third quarter driven by its primary growth engine Revlimid. Abraxane and Pomalyst are also expected to perform impressively in the third quarter. However, Vidaza sales will continue to fall due to generic competition. Also, Thalomid sales are expected to continue their downward journey.
Focus will also be on the performance of Otezla, the latest entrant to Celgene’s portfolio. Otezla gained FDA approval for the psoriatic arthritis indication in March this year. Otezla sales should improve from the mere $5 million recorded in the second quarter.
The label of the drug was expanded late last month to include treatment-naïve as well treatment experienced patients suffering from moderate-to-severe plaque psoriasis. Sales from the new indication will, however, not be significant in the third quarter.
Operating costs are expected to increase in the third quarter. While research & development costs are expected to increase due to the company’s efforts to develop its pipeline, selling, general and administrative expenses should increase due to promotional costs associated with Otezla.
Also, we expect Celgene to provide a detailed update on its pipeline candidates on the earnings call.
Earnings Whispers?
Our proven model does not conclusively show that Celgene is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%, as both these estimates stand at 82 cents per share.
Zacks Rank: Celgene’s Zacks Rank #3 (Hold) when combined with an ESP of 0.00% makes surprise prediction 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.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.
Teva Pharmaceutical Industries Ltd. (TEVA) has an earnings ESP of +5.79% and carries a Zacks Rank #2 (Buy). It is scheduled to report third-quarter results on Oct 30.
The earnings ESP for Ligand Pharmaceuticals Inc. (LGND) is +30.00% and it carries a Zacks Rank #2. The company is scheduled to release third-quarter results on Oct 27.
Vertex Pharmaceuticals Inc. (VRTX) has an earnings ESP of +28.07% and carries a Zacks Rank #2. It is expected to report third-quarter results on Oct 28.
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