Alere Inc. (ALR) is set to report fourth-quarter 2014 results on Feb 10. Last quarter, the company posted EPS of 44 cents, which missed the Zacks Consensus Estimate by 8 cents. We note that the company has missed the Zacks Consensus Estimate by an average 10.2% in the last four quarters.
Let’s see how things are shaping up for this quarter.
Factors at Play
Of late, Alere has been following a divestment strategy aimed at getting rid of non-core assets and focusing more on developing its core operations. Apart from paying off debt, the company expects the divestitures to boost the top line and improve its cost structure.
The divestitures of Alere ACS unit – its health information exchange system – along with 40% of its stake in Vedalab (for roughly $10 million) and vet business unit to Bionote (for around $45 million) and the most recent sale of Alere Health and its subsidiaries to Optum – the health services business unit of Minneapolis, MN-based UnitedHealth Group (UNH) – for approximately $600 million will help it to de-leverage the balance sheet.
Alere intends to focus on core areas like rapid diagnostics. Notably, Alere’s Influenza i A & B Test and HIV Combo Test were recently granted a waiver by the U.S. Food and Drug Administration (FDA). With the Clinical Laboratory Improvement Amendments, the company’s tests can now be used across a wide variety of healthcare settings.
Earnings Whispers?
Our proven model does not conclusively show that Alere is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or at least 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Alere currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 63 cents.
Zacks Rank: Alere has a Zacks Rank #3 which increases the predictive power of ESP; but when combined with a 0.00% ESP, it makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are a few stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:
Actavis plc (ACT) with an Earnings ESP of +4.38% and a Zacks Rank #2 (Buy).
Alnylam Pharmaceuticals (ALNY) with an Earnings ESP of +4.55% and a Zacks Rank #2.
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