Mylan (MYL) is set to report fourth quarter 2014 results on Mar 2 before the market opens. Last quarter, the company posted a positive earnings surprise of 1.75%. The company has delivered positive earnings surprises in three of the last four quarters with an average beat of 2.27%. We expect the company to beat expectations in the fourth quarter as well.
Why a Likely Positive Surprise?
Our proven model shows that Mylan is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.89%. This is a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings estimates. 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.
The combination of Mylan’s Zacks Rank #3 and an earnings ESP of +2.89% makes us confident of an earnings beat this season.
Specialty Segment and Product Launches to Boost Sales
Mylan expects its fourth quarter adjusted earnings to be in the band of $1.03 to $1.09 per share, much above the year-ago earnings of 78 cents. Earnings in the fourth quarter are expected to be boosted by new product launches in North America along with the strong performance of the Specialty segment.
The Specialty segment is expected to perform well in the quarter on the back of its flagship product – EpiPen Auto-Injector. The company said on its third quarter conference call that the Specialty segment will continue to grow.
Meanwhile, Mylan’s Generics segment has been performing well over the last few quarters and is expected to continue its run in the fourth quarter as well. Mylan has seen quite a few generic launches over the past few quarters and this quarter was no exception. The newly launched products should perform well, driving segmental growth.
Mylan is set to strengthen its Generics segment further with the impending acquisition of Abbott Laboratories’ (ABT) branded specialty and generics business that the company had announced last year. We expect some updates on the impending deal at the release.
Mylan expects 2014 earnings per share in the range of $3.54 to $3.60 and revenues in the range of $7.7 billion to $7.8 billion. Mylan is expected to provide its guidance for 2015 on its fourth quarter call. We expect investor focus to be on the company’s guidance.
Other Stocks to Consider
Here are some other companies you may consider as our model shows that they also have the right combination of elements.
Amarin Corporation plc (AMRN) has an earnings ESP of +14.29% and carries a Zacks Rank #2. It is set to report fourth quarter results on Mar 3.
Aratana Therapeutics, Inc. (PETX) has an earnings ESP of +10.00% and carries a Zacks Rank #3. It is expected to report fourth quarter results on Mar 12.
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