We expect Mylan MYL 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 0.32%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Mylan 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: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +1.15%. This is a meaningful indicator of a likely positive earnings surprise for the shares.
Zacks Rank: The combination of Mylan’s Zacks Rank #3 (Hold) and +1.15% 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.
What is Driving the Better-than-Expected Earnings?
For the second quarter of 2015, the company expects earnings in the range of 86 cents to 90 cents per share. Mylan’s Generics segment has been performing well over the last few quarters and is expected to continue its run in this quarter as well. Mylan has seen quite a few generic launches over the past few quarters and this quarter was no exception. The newly launched products should perform well, driving segmental growth.
The company has been in the news lately for its efforts to acquire Perrigo Company PRGO. Mylan believes that the transaction will be accretive to adjusted earnings on a fully synergized basis. The company expects to realize annual pre-tax operational synergies of at least $800 million by the end of year four after completing the deal. Mylan has been quite active on the deal signing and acquisition front over the past few quarters.
Mylan expects 2015 earnings per share in the range of $4.00 to $4.30 and revenues in the range of $9.7 billion to $10.1 billion.
Other Stocks to Consider
Mylan 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.
The Earnings ESP for Immune Design Corp. IMDZ is +20.41% and it carries a Zacks Rank #3. The company is expected to release results on Aug 13.
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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