Celgene Corporation CELG is scheduled to report first-quarter 2015 results on Apr 30, before the opening bell. Celgene’s earnings track record has been pretty good – last quarter, the company delivered a positive earnings surprise of 3.41%. The company has posted a positive earnings surprise in each of the trailing four quarters with an average beat of 4.36%. Let's see how things are shaping up for this announcement.
Strong Product Sales Could Drive Q1 Results
We expect Celgene to report strong revenues in the first quarter driven by its primary growth driver Revlimid. The drug has been doing well both in the U.S. and international markets. Abraxane and Pomalyst are also expected to perform impressively in the first quarter. However, Vidaza sales are expected to continue to fall due to generic competition. Also, Thalomid sales will likely continue their downward journey.
Focus will also be on the performance of Otezla, a new entrant to Celgene’s portfolio. Otezla sales should improve from the $47 million recorded in the fourth quarter. The FDA has cleared the drug for the treatment of adult patients with active psoriatic arthritis (Mar 2014) and for the treatment of patients with moderate-to-severe plaque psoriasis who are candidates for phototherapy or systemic therapy (Sep 2014).
Celgene has been making prudent acquisitions and entering into deals to bolster its pipeline, the latest being the deal to acquire privately held biotechnology company, Quanticel Pharmaceuticals, Inc. for an upfront payment of $100 million and additional milestone payments of $385 million. Celgene does not expect the deal to impact its 2015 earnings guidance.
Along with its fourth-quarter results, Celgene provided encouraging guidance for 2015. The company expects adjusted earnings for 2015 in the range of $4.60–$4.75 per share.
Net product sales for 2015 are expected to be approximately $9–$9.5 billon, up 22.3% year over year. Foreign exchange translations are expected to impact revenues negatively by $100 million. We could see an updated guidance based on the performance in the first quarter and a likely change in foreign exchange translations.
Earnings Whispers
Our proven model does not conclusively show that Celgene is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Earnings ESP for Celgene is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 93 cents.
Zacks Rank: Celgene carries a Zacks Rank #3. We caution against stocks with a Zacks Rank #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 Actavis ACT is +1.04% and it carries a Zacks Rank #2. The company is scheduled to release results on May 11.
Tetraphase Pharmaceuticals, Inc. TTPH has an Earnings ESP of +6.06% and carries a Zacks Rank #3 (Hold). It is expected to report results on May 11.
Vertex Pharmaceuticals Inc. VRTX has an Earnings ESP of +17.33% and a Zacks Rank #3. The company is scheduled to release results on Apr 29.
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