We expect Hospira (HSP) to beat expectations when it reports third-quarter 2014 results before the opening bell on Nov 6.
Why a Likely Positive Surprise?
Our proven model shows that Hospira is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +5.66%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.
Zacks #3 Rank (Hold): The combination of Hospira’s Zacks Rank #3 (Hold) and +5.66% ESP makes us confident of an earnings beat this season.
Note that stocks with Zacks Ranks of #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.
What is Driving the Better -Than -Expected Earnings?
Even though we expect Hospira to continue facing headwinds in the form of manufacturing issues and the entry of generic versions of Precedex, we believe that the Specialty Injectable Pharmaceuticals (SIP) segment will continue to perform well in the third quarter.
The SIP segment includes multiple generic injectable drugs. In the first half of 2014, this segment generated almost 69% of the global net sales, primarily driven by growth in both price and volume.
Hospira’s earnings track record has also been pretty good – last quarter, the company delivered a positive earnings surprise of 28.57%. Hospira has posted a positive earnings surprise in each of the trailing four-quarters with an average beat of 16.59%.
Other Stocks to Consider
Here are some other companies in the broader health care sector you may want to consider as our model shows that they have the right combination of elements –- a positive Zacks Earnings ESP and a Zacks Rank #1, 2 or 3 –- to post an earnings beat this quarter.
Actavis (ACT) has an earnings ESP of +0.32% and carries a Zacks Rank #1(Strong Buy). It is expected to report third-quarter results on Nov 5.
Alnylam Pharmaceuticals, Inc. (ALNY) has an earnings ESP of +9.23% and carries a Zacks Rank #2 (Buy). It is scheduled to report third-quarter results on Nov 5.
Medivation, Inc. (MDVN) has an earnings ESP of +7.34% and carries a Zacks Rank #1. It is expected to report third-quarter results on Nov 6.
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