Endo International, Inc. ENDP is scheduled to report second-quarter 2015 results on Aug 10, 2015.
Endo’s track record has been pretty impressive with the company beating estimates in three of the last four quarters with an average earnings surprise of 6.58%. Last quarter, the company had posted a negative earnings surprise of 10.28%.
Let’s see how things are shaping up for this announcement.
Factors at Play This Quarter
Endo’s generic business in the U.S. continues to perform well on the back of increased demand and launch of authorized generic versions of new products. The addition of Boca Pharmacal also aided segmental sales. The acquisition of DAVA Pharma has strengthened the segment further. We expect the momentum to continue through the second quarter as well.
Endo has implemented a growth-by-acquisition strategy. Endo has entered into an agreement to acquire privately held Par Pharmaceutical by the end of 2015. The acquisition of Par Pharma will boost Endo’s generics portfolio and pipeline. The deal is expected to be earnings accretive in the first year of completion and result in double-digit accretion in 2016.
The company has also been divesting its underperforming assets and focusing on core business. It has sold its men's and prostate health businesses to Boston Scientific BSX. Earlier this week, Endo announced another strategic divestiture. The company is set to divest its portfolio of device, vaccine and other non-core products from its international subsidiary in South Africa.
We could also see updates related to the company’s 2015 guidance. The company expects earnings per share for 2015 in the range of $4.40 to $4.60. The company expects revenues in the range of $2.90 billion to $3.00 billion.
Earnings Whispers?
Our proven model does not conclusively show that Endo is likely to beat earnings 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.
Negative Zacks ESP: Endo has an earnings ESP of -4.9% as the Most Accurate estimate stands at 97 cents while the consensus estimate is pegged higher at $1.02. Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Zacks Rank: Endo’s Zacks Rank #4 (Sell) and negative ESP make an earnings beat unlikely this season.
As it is, we caution against Sell-rated stocks (Zacks Rank #4 and #5) going into the earnings season, especially when the company is witnessing negative estimate revisions.
Stocks That Warrant a Look
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 12.
Inovio Pharmaceuticals, Inc. INO has an Earnings ESP of +275.00% and carries a Zacks Rank #3. The company is slated to release second-quarter results on Aug 10.
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