Endo International, Inc. ENDP is scheduled to report third-quarter 2015 results on Nov 5.
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 3.60%. Last quarter, the company had posted a positive earnings surprise of 5.88%.
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 this momentum to continue through the third quarter as well.
Endo has implemented a growth-by-acquisition strategy. The company has acquired privately held Par Pharmaceutical, which boosted its generics portfolio and pipeline. The company also acquired a broad portfolio of branded and generic injectable and established products focused on pain, anti-infectives, cardiovascular and other specialty therapeutics areas from a subsidiary of Aspen Holdings.
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.
The company expects to report revenues of $720 million to $740 million in the third quarter. The Par Pharma acquisition is not expected to have a material impact on the quarter.
For 2015, the company expects earnings in the range of $4.50–$4.60 per share. It expects revenues in the range of $3.22 billion to $3.27 billion. For 2016, Endo expects earnings per share in the range of $5.85 to $6.15.
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. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.02.
Zacks Rank: Although Endo’s Zacks Rank #2 (Buy) enhances the predictive power of the ESP, its ESP of 0.00% makes a surprise prediction difficult.
However, 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.
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 Alnylam Pharmaceuticals, Inc. ALNY is +2.13% and it carries a Zacks Rank #3 (Hold). The company is expected to release results on Nov 4.
Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and a Zacks Rank #3. It is expected to release results on Nov 9.
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