Celgene Corporation (CELG) is scheduled to report fourth-quarter 2014 results on Jan 29, before the opening bell. In the last reported quarter, Celgene recorded a positive earnings surprise of 7.32%. Let’s see how things are shaping up for this announcement.
Strong Product Sales Could Drive Q4 Results
As per preliminary results announced earlier this month, the company expects adjusted earnings per share for the fourth quarter 2014 of $1.01. The Zacks Consensus Estimate for the quarter currently stands at 88 cents. Net product sales for the fourth quarter are expected to be approximately $2.05 billion, including a negative foreign exchange impact of $25 million.
The company expects earnings to be $3.71 per share in 2014, much above the Zacks Consensus Estimate of $3.26. Net product sales are expected to be approximately $7.56 billion, up 19% year over year in 2014. Net sales of Revlimid are projected at $4.98 billion, reflecting an increase of 16%. Sales of Abraxane in 2014 are projected to grow by 31% to $848 million. Pomalyst/ Imnovid and Otezla are expected to contribute $680 million and $70 million, respectively, to Celgene’s 2014 total revenues.
We note that Celgene is facing generic competition for several important products including Vidaza. We believe that focus will remain on the performance of key products like Revlimid as well as recently approved products like Otezla.
Along with its preliminary results, Celgene provided encouraging guidance for 2015. The company expects adjusted earnings for 2015 in the range of $4.60–$4.75 per share, up 26% over expected earnings of $3.71 per share in 2014.
Net product sales for 2015 are expected to be approximately $9–$9.5 billon, up 22.3% year over year. Foreign exchange translations are expected to impact revenues negatively by $100 million. Net sales of oncology drug, Revlimid, the key growth driver at Celgene, are projected in the range of $5.6–$5.7 billion, reflecting an increase of 13.5 % year over year. We expect to see more details on the 2015 guidance on the earnings call.
Earnings Whispers?
Our proven model does not conclusively show that Celgene is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: Earnings ESP for Celgene is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 88 cents per share.
Zacks Rank: Celgene’s Zacks Rank #1 (Strong Buy) increases the predictive power of the ESP. However, we need to have a positive ESP to be confident of an earnings beat.
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 That Warrant a Look
Here are some 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 Regeneron Pharmaceuticals, Inc. (REGN) is +8.65% and it carries a Zacks Rank #3 (Hold). The company is scheduled to release its fourth quarter results on Feb 10.
Actavis (ACT) has an earnings ESP of +4.7% and carries a Zacks Rank #3. It is expected to report fourth-quarter results on Feb 18.
AbbVie Inc. (ABBV) has an earnings ESP of +1.18% and carries a Zacks Rank #2 (Buy). It is scheduled to report fourth-quarter results on Jan 30.
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