Leading biotechnology company Celgene Corporation (CELG) is all set to announce its third quarter 2011 results on October 27, 2011 before the opening bell. The Zacks Consensus Estimate for the third quarter is $0.86 (year-over-year increase of 32.3%) on revenues of $1,207 million (year-over-year increase of 32.6%).
Second Quarter Recap
Celgene’s second quarter 2011 earnings (excluding special items but including stock-based compensation expense) of $0.78 per share beat the Zacks Consensus Estimate by $0.01 and the year-ago earnings by $0.17. On a reported basis (including special items), the company’s earnings increased 78% to $0.59. Higher revenues boosted earnings in the quarter.
Adjusted revenues climbed 38% to $1.18 billion in the second quarter of 2011. Revenues were boosted by the impressive performance of Celgene’s cancer products Revlimid and Vidaza. Revenue for the quarter surpassed the Zacks Consensus Estimate of $1.10 billion.
(Read our full coverage on this earnings report: Celgene Tops, Lifts View ).
Agreement of Estimate Revisions
Estimate revisions for Celgene have been scarce over the past month. Over the past 30 days, only 1 of the 8 analysts covering the stock for the third quarter of 2011 has revised the earnings estimate. The analyst has upped the estimate. Earnings estimates for fiscal 2011 too have witnessed a solitary revision (in the upward direction) over the last 30 days.
We note that estimates were revised upwards by almost all the analysts covering the stock following the improved outlook provided by the company while releasing the second quarter results. As the estimates have already been revised, the stock has not seen significant revisions thereafter. (Read our full coverage on the post earnings scenario at: Earnings Scorecard: Celgene).
Magnitude of Revisions
Estimates for the third quarter of 2011 have increased only by $0.01 to $0.86 over the last 30 days due to the lack of significant estimate revisions by the analysts following the stock. Annual estimates (for 2011) have gone up by only $0.01 per share to $3.25 over the last 30 days.
Surprise History
Celgene has delivered mixed results over the past four quarters. The Summit, New Jersey-based company has fallen short of the Zacks Consensus Estimate in two quarters (first quarter 2011 and fourth quarter 2010) and surpassed the same in the other two. The maximum positive surprise of 1.56% was recorded in third quarter 2010. On average, the earnings surprise is currently negative and stands at 0.72%.
Our Recommendation
We recently upgraded Celgene to Outperform from Neutral following its strong second quarter 2011 results and the decision of the European Committee for Medicinal Products for Human Use (CHMP) that the benefits associated with cancer drug Revlimid outweigh the risks in patients suffering from multiple myeloma.
We are also impressed by Celgene’s impressive oncology portfolio, efforts to expand further, strong balance sheet and strong pipeline. These positive catalysts cause us to believe that Celgene will continue performing impressively in the coming quarters. We believe that the current price represents an attractive entry point for long-term investors.
Our optimism is justified by the Zacks #1 Rank (Strong Buy rating) carried by the stock in the short run.
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