We expect Agios Pharmaceuticals, Inc. AGIO to beat expectations when it reports second-quarter 2015 results on Aug 6. The company has recorded positive earnings surprises in two of the trailing four quarters with an average beat of 37.67%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Agios is likely to beat earnings because it has the right combination of two key ingredients – a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to likely post an earnings beat.
Positive ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +75%. This is a meaningful indicator of a likely positive earnings surprise for the shares.
Zacks Rank: The combination of Agios’s Zacks Rank #1 and +75% ESP makes us confident in looking for an earnings beat this season.
We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors at Play This Quarter
Agios, a development-stage biopharmaceutical company, is focused on the development of potential treatment for cancer and rare genetic disorders of metabolism. The company currently has several early stage candidates in its pipeline. These include AG-221 for IDH2-mutant positive hematologic malignancies (phase I) and IDH2-mutant positive solid tumors (phase I), AG-120 for IDH1-mutant positive hematologic malignancies (phase I) and IDH1-mutant positive solid tumors (phase I), AG-881 for solid tumors with IDH mutation (phase I) and AG-348 for pyruvate kinase deficiency (phase I).
With Agios not having any approved products in its portfolio, investor focus should remain on pipeline updates since a number of pipeline related activities are lined up for the rest of 2015.
Agios is collaborating with Celgene CELG for AG-221, AG-120 and AG-881 which will continue to bring in collaboration revenues.
Other Stocks to Consider
Agios is not the only firm looking up this earnings season. Here are a few 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.
Mylan MYL has an Earnings ESP of +1.15% and carries a Zacks Rank #3. The company is scheduled to release results on Aug 6.
Epizyme, Inc. EPZM has an Earnings ESP of +3.08% and carries a Zacks Rank #2. The company is slated to release results on Aug 6.
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