Celgene Corporation (CELG) is set to unveil its fourth quarter and full year 2011 results on January 26, 2012 before the start of trading. The Zacks Consensus Estimate for the fourth quarter is 95 cents (year-over-year increase of 53.2%) on revenues of $1,289 million (year-over-year increase of 20.9%).
For 2011, the Zacks Consensus Estimate is $3.33 (year-over-year increase of 38.2%) on revenues of $4,827 million (year-over-year increase of 33.3%).
Third Quarter Recap
Celgene’s third quarter 2011 earnings (excluding special items but including stock-based compensation expense) of 90 cents per share beat the Zacks Consensus Estimate by 4 cents and the year-ago earnings by 25 cents. Higher revenues boosted earnings in the quarter.
Total revenues climbed 37% to $1.25 billion in the third quarter of 2011. Revenues were boosted by the impressive performance of Celgene’s cancer products Revlimid and Vidaza.
(Read our full coverage on this earnings report: Celgene Tops, Guides Up ).
Agreement of Estimate Revisions
Despite having a long-term positive outlook on the stock, some analysts have become a tad cautious regarding the performance of Celgene in the to-be-reported quarter. Consequently, 2 of the 4 analysts covering the stock for the final quarter of 2011 have slashed earnings estimates over the last 30 days.
No upward revision has been observed in the time period. We believe that the downward bias is primarily due to the lower than expected preliminary revenues announced by Celgene earlier this month. Fiscal 2011 earnings estimates too have a similar downward bias over the last 30 days.
However, the long-term prospects of the stock are bright. This is reflected by the upward bias observed in fiscal 2012 earnings estimate revisions over the last 30 days. Two of the four analysts covering the stock for fiscal 2012 have increased their fiscal 2012 earnings estimates as opposed to a sole downward revision.
The optimism is shared by Celgene’s management which gave a bright outlook for fiscal 2012 at the fourth quarter preliminary results. Adjusted earnings (excluding stock-based compensation expense and other special items) for 2012 are projected in the range of $4.70-$4.80 per share, up 25% year over year.
Given the strong oncology portfolio, we expect Celgene to easily achieve the 2012 guidance. We are also impressed by Celgene’s robust pipeline, which includes approximately 25 late-stage and 20 early-stage candidates. Key pipeline related news are expected in 2012. Positive news regarding the pipeline would boost the stock further.
Magnitude of Revisions
Estimates for the fourth quarter of 2011 as well as fiscal 2011 have decreased by 5 cents over the last 30 days due to the downward bias in estimate revisions. Fiscal 2012 estimates have gone up by 16 cents per share to $4.13 over the last 30 days following the bright outlook given by the company for 2012.
Surprise History
Celgene has surpassed earnings estimates in two of the last four quarters. The company recorded a maximum positive surprise of 12.79% in the third quarter of 2011. On average, the earnings surprise was 2.09%.
Our Recommendation
We have an Outperform recommendation on Celgene. We believe that Celgene, driven by its impressive oncology portfolio, expansion efforts, strong balance sheet and robust pipeline, will outperform the broader market in the coming quarters.
Our optimism is justified by the Zacks #2 Rank (Buy rating) carried by the stock in the short run.
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