We are in the middle of the Q2 earnings season with more than half of the S&P 500 results already out. With results from 265 S&P 500 members that have reported so far, the Q2 earnings season seem to have kicked off well with results moving ahead of the preceding quarter for most of the companies. The Q2 earnings season is seeing strong momentum on the back of solid revenues. This week will be a busy one with almost 1000 companies, including 139 S&P 500 members, expected to report.
Story So Far
As of Jul 27, 265 S&P 500 companies have reported earnings results, which account for about 66.2% of the total market capitalization of the index. According to the latest Earnings Preview, total earnings for these companies are up 23.6% from the same period last year on 10.1% higher revenues. Meanwhile, 80.8% of these companies surpassed earnings estimates, while 72.1% beat revenue estimates.
Please note that the broader Medical sector (includes drug, biotech as well as Medical Device companies) is expected to record year-over-year growth of 6.9% in revenues and 13.2% in earnings in the second quarter.
Several pharma/biotech bigwigs have reported second-quarter results last week. Eli Lilly beat estimates for both earnings and sales and also raised its outlook for 2018 for the second time this year. Glaxo GSK, Allergan, AstraZeneca AZN and Bristol-Myers BMY all beat estimates for earnings and sales. While Allergan raised its guidance for both earnings and sales, Glaxo and Bristol Myers raised their earnings expectations. AstraZeneca maintained its previously issued earnings and sales outlook for the year. It expects to deliver a better performance in the second half of the year.
Biogen, Inc. BIIB topped both sales and earnings estimates on strong sequential growth for key drugs. Amgen, Gilead and Celgene also beat both earnings and sales in the quarter. Celgene also raised its earnings guidance for 2018 during the quarter. Here we have three other pharma/biotech companies, which are scheduled to release their second-quarter earnings on Jul 31. Let's see how things are shaping up for these announcements.
Pfizer Inc. PFE
The pharma giant has a strong record of earnings surprises. The company’s earnings surpassed expectations in each of the last four quarters, leading to an average positive surprise of 5.23%. The Zacks Consensus Estimate for earnings for the second quarter is pegged at 75 cents.
Pfizer’s shares have risen 6% this year so far, compared with 1.2% growth for the industry.
Our proven model provides some idea about the stocks that are about to release their earnings results. Per our model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our proven model does not conclusively show that Pfizer is likely to beat on earnings this quarter. This is because the company carries a Zacks Rank#3 and has an earnings ESP of -0.45%.
In the Innovative Health (IH) segment, new products like Xeljanz (rheumatoid arthritis) and Ibrance (breast cancer) as well as older products like Chantix (smoking cessation) and Eliquis (blood thinner) should contribute to the top line, meaningfully. In the Essential Health (EH) segment, biosimilars and emerging markets are expected to support sales. (Read more: Will Pfizer Keep the Earnings Streak Alive in Q2?)
Incyte Corporation INCY
In the last reported quarter, the company missed estimates by 112.50%. Incyte’s earnings track record has been mixed so far. Over the last four quarters, the company’s earnings surpassed expectations twice. Nevertheless, Incyte delivered an average positive earnings surprise of 38.7% in the said time frame.The Zacks Consensus Estimate for earnings for the second quarter is pegged at 29 cents.
Incyte’s stock has lost 27.6% in the year so far, worse than the industry’s decline of 5.4%.
Incyte continues to gain traction on its lead drug, Jakafi’s performance. In order to expand the patient population and increase the commercial potential of the drug, the company is working on expanding Jakafi’s label, further. (Read more: Incyte to Report Q2 Earnings: What's in the Cards?)
Our proven model does not conclusively show that Incyte is likely to beat on earnings this quarter. This is because the company carries a Zacks Rank #3 and has an earnings ESP of -21.2%.
Endocyte Inc. ECYT
The company logged a positive earnings surprise of 15.79% in the last reported quarter. The company has a mixed earnings surprise record, having surpassed the Zacks Consensus Estimate in two and missing in the other two of the trailing four quarters. Overall, the company delivered an average surprise of positive 1.40%. The Zacks Consensus Estimate for the second quarter stands at a loss of 19 cents.
Endocyte’s shares have rallied 263.1% year to date compared with the industry’s growth of 2.4%.
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Endocyte is likely to beat on earnings in the to-be-reported quarter because it carries a Zacks Rank #2 and has an Earnings ESP of +21.05%.
The company remains optimistic about its pipeline candidate 177Lu-PSMA-617, which is its priority at the moment, representing a greater than $1 billion market opportunity. In June, the company initiated a phase III VISION study for the candidate and the investors are expected to remain focused on the development of this candidate in second-quarter earnings call.
The company will also bring its adaptor-controlled chimeric antigen receptor t-cell (CAR T-cell) program named EC17 into the clinic, in the fourth quarter of 2018, which holds great potential.
We expect the investors’ raise questions on these pipeline candidates at the Q2 earnings call. (Read more: Is a Beat in Store for Endocyte This Earnings Season?)
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