Alexion Pharmaceuticals, Inc. (ALXN) is scheduled to report its fourth-quarter 2014 results on Jan 29, before the opening bell.
In the last quarter, Alexion delivered a positive 8.57% earnings surprise. Let’s see how things are shaping up for this announcement.
Soliris Could Drive Q4 Results
Soliris, Alexion’s sole marketed product, is expected to continue performing well for its approved indications – paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome – thereby driving top-line growth. The company is expected to add new patients in the U.S., Europe and Japan.
Increased operating costs will however hurt the bottom line in the fourth 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 Alexion’s efforts to expand. Meanwhile, foreign exchange headwinds are also expected to increase in the fourth quarter.
Though increased operating costs are expected to hurt Alexion’s bottom line in the fourth quarter, the long-term growth prospects are encouraging. The successful development and subsequent commercialization of the pipeline will not only boost the company’s top line but also reduce its dependence on a single product for growth.
At the time of releasing third quarter results, Alexion increased its guidance for 2014 both on the top and the bottom line. The company expects adjusted earnings per share in the range of $5.15 to $5.20 on revenues of $2.220 billion to $2.225 billion.
We believe that investor focus will remain on updates on the performance of Soliris. Investors are also looking forward to the company’s outlook for 2015, which is expected to be revealed along with the earnings release.
Earnings Whispers?
Our proven model does not conclusively show that Alexion is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: Earnings ESP for Alexion is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.17 per share.
Zacks Rank: Alexion’s Zacks Rank #1 (Strong Buy) increases the predictive power of the ESP. However, we need to have a positive ESP to be confident of an earnings beat.
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 health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
The earnings ESP for Regeneron Pharmaceuticals, Inc. (REGN) is +8.65% and it carries a Zacks Rank #3 (Hold). The company is scheduled to release its fourth quarter results on Feb 10.
Actavis (ACT) has an earnings ESP of +4.7% and carries a Zacks Rank #3. It is expected to report fourth-quarter results on Feb 18.
AbbVie Inc. (ABBV) has an earnings ESP of +1.18% and carries a Zacks Rank #2 (Buy). It is scheduled to report fourth-quarter results on Jan 30.
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