GW Pharmaceuticals GWPH is set to report third-quarter fiscal 2015 results on Aug 6, before the market opens. Last quarter, the company posted a positive earnings surprise of 52.85%. Let’s see how things are shaping up for this announcement.
Factors at Play This Quarter
The company’s key growth driver, Sativex, is approved outside the U.S. for the treatment of spasticity associated with multiple sclerosis. Sativex is being evaluated in a phase III study for the treatment of pain associated with cancer. The company has initiated pivotal phase III studies on Epidiolex for childhood epilepsy. GW Pharma is also developing other cannabinoid-based treatments for indications like glioma, ulcerative colitis, schizophrenia and type II diabetes.
Investor focus should remain on pipeline updates since a number of pipeline related activities are lined up for the rest of 2015.
What Our Model Indicates
Our proven model does not conclusively show that GW Pharma is likely to beat estimates 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) to likely post an earnings beat. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of $1.30 per share.
Zacks Rank: GW Pharma currently carries a Zacks Rank #2. Although the company’s Zacks Rank #2 enhances the predictive power of the ESP, the company’s ESP of 0.00% makes a surprise prediction difficult.
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 a few 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 Immune Design Corp. IMDZ is +20.41% and it carries a Zacks Rank #3. The company is expected to release results on Aug 13.
Mylan MYL has an Earnings ESP of +1.15% and carries a Zacks Rank #3. The company is scheduled to release results on Aug 6.
Epizyme, Inc. EPZM has an Earnings ESP of +3.08% and carries a Zacks Rank #2. The company is slated to release results on Aug 6.
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