Allergan plc AGN is scheduled to report third quarter 2015 results before the opening bell on Nov 4. The company has had a decent run over the last four quarters with earnings surpassing expectations in three quarters and meeting expectations in the second quarter of 2015. The average beat over the last four quarters is 4.98%. Let’s see how things are shaping up for the third quarter announcement.
Acquisitions to Drive Earnings, Pfizer Discussions in Focus
Allergan’s top as well as bottom line should continue to be driven by the acquisition of Botox-maker Allergan Inc. as well as other acquisitions. Products like Lo Loestrin should perform well. The company’s focus on the women’s health segment should lead to an improvement in the performance of products in this segment.
Investors will also be interested to hear about Namzaric’s performance. Namzaric was launched in the second quarter of 2015 and is expected to help reduce the impact of the Jul 2015 entry of Namenda IR generics. The company started a DTC campaign for Namzaric in September and expects seven out of the top 10 plans to have coverage by the beginning of 2016. This should drive market expansion going forward.
The performance of other new product launches like Avycaz (treatment for adult patients with complicated intra-abdominal and urinary tract infections) will also be in focus.
Another key area of focus will be the progress in discussions with Pfizer PFE regarding a merger deal. With rumors about the companies being in merger discussions surfacing last week, both companies confirmed that they are in early stages of discussion. Meanwhile, Allergan is selling off its generics business to Teva Pharmaceutical Industries Ltd. TEVA for $40.5 billion. The deal is slated to go through in the first quarter of 2016. Allergan will be treating its generics business as discontinued operations from the third quarter.
The company had provided an updated outlook for the second half of 2015 which is expected to generate revenues in excess of $8 billion. Earnings in the second half of the year are expected in the range of $6.25 – $6.65 per share.
With the company significantly focusing on its branded segment, pipeline updates are also eagerly-awaited as the company will be holding an R&D day along with presenting third quarter results.
Earnings Whispers?
Our proven model does not conclusively show that Allergan is likely to beat 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.
Zacks ESP: Earnings ESP for Allergan is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both $3.25 per share.
Zacks Rank: Allergan carries a Zacks Rank #3 (Hold). 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.
Other Stocks to Consider
Here is a health care company you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:
Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and carries a Zacks Rank #3 (Hold). The company is expected to report results on Nov 9.
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