Pacific Biosciences of California, Inc. PACB is scheduled to report first-quarter 2015 earnings results on May 5. Last quarter, the company reported loss of 26 cents per share which was in line with the Zacks Consensus Estimate. The average earnings surprise over the last four quarters is 8.79%.
Let us see how things are shaping up for this announcement.
Factors Influencing This Quarter
Pacific Biosciences develops, manufactures and markets PacBio RS II Sequencing systems, which helps in studying synthesis, composition, structure, and regulation of deoxyribonucleic acid, popularly known as DNA.
PacBio RS II remains the growth engine for Pacific Biosciences. In the fourth quarter, Pacific Biosciences delivered 15 PacBio RS II Sequencing instruments, compared to five instruments in the year-ago quarter. Moreover, the company booked orders for 10 instruments, ending the quarter with 15 in backlog.
Management expects instrument revenues to decline sequentially in the first quarter. Consumables are also expected to report a flat quarter, primarily due to seasonality. As a result, first-quarter 2015 revenues are expected to decline sequentially but increase substantially from the year-ago quarter.
Pacific Biosciences expects quarterly gross margin to remain in the mid-20 range. Both research & development and selling, general & administrative expenses are expected to increase modestly.
What Our Model Indicates
Our proven model does not conclusively show that Pacific Biosciences is likely to beat the Zacks Consensus Estimate in the first quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for Pacific Biosciences is 0.00%. This is because the Most Accurate Estimate is pegged at a loss of 27 cents, in line with the Zacks Consensus Estimate.
Zacks Rank: Pacific Biosciences’ Zacks Rank #3 increases the predictive power of ESP. However, we also 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.
Addus Homecare ADUS has an Earnings ESP of +8.33% and a Zacks Rank #2.
Actavis plc ACT has an Earnings ESP of +1.04% and a Zacks Rank #2.
Regulus Therapeutics RGLS has an Earnings ESP of +11.54% and a Zacks Rank #2.
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