Keryx Biopharmaceuticals, Inc.’s (KERX) is scheduled to report its third-quarter 2014 results on Nov 6. Last quarter, the company had posted a negative earnings surprise of 4.35%. Let’s see how things are shaping up for this announcement.
Factors at Play This Quarter
In Sep 2014, the FDA approved Keryx’s ferric citrate for controlling serum phosphorus levels in patients suffering from chronic kidney disease (CKD) on dialysis. The approval was, however, accompanied by a few warnings.
The launch of ferric citrate in the U.S. will impact the cash burn in the third quarter. Keryx expects to launch the drug within 12 weeks in the U.S. During the second-quarter earnings call, management indicated that the company has sufficient cash for the launch in the U.S.
Keryx has also filed for the drug in the EU as a treatment of hyperphosphatemia in patients suffering from CKD. The final decision on the approval of the drug in the EU is expected by mid 2015.
Apart from ferric citrate, Keryx has no approved products. As a result, the company will be primarily dependent on ferric citrate for growth. However, limitations and warnings have restricted its sales potential.
Keryx had recorded negative earnings surprises in the last four consecutive quarters with an average negative earnings surprise of 20.1%.
Earnings Whispers?
Our proven model does not conclusively show that Keryx is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Keryx is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate both stand at a loss of 27 cents per share.
Zacks Rank: Keryx carries a Zacks Rank #3 (Hold). Though a favorable Zacks Rank increases the predictive power of the ESP, the company’s 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that they have the right combination of elements.
Hospira Inc. (HSP) has an earnings ESP of +5.7% and carries a Zacks Rank #3. It is expected to report third-quarter results on Nov 6.
Actavis plc (ACT) has an Earnings ESP of +0.32% and holds a Zacks Rank #2 (Buy). The company will report third-quarter results on Nov 5 before market opens.
Mallinckrodt (MNK) has an earnings ESP of +3.7% and carries a Zacks Rank #2. It is expected to report third-quarter results on Nov 19.
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