Synta Pharmaceuticals Corp. SNTA is expected to report third-quarter 2015 results on Nov 5. The company has recorded positive earnings surprises in two of the trailing four quarters with an average beat of 7.29%. Let’s see how things are shaping up for this announcement.
Factors at Play
Synta’s most advanced candidate, ganetespib, is being evaluated for several indications including breast cancer, ovarian cancer and acute myeloid leukemia. Ganetespib is a novel heat shock protein 90 (Hsp90) inhibitor. Earlier this month, Synta terminated the phase III GALAXY-2 study evaluating ganetespib in combination with Sanofi's SNY Taxotere (docetaxel) in the second-line treatment of patients with advanced non-small cell lung cancer. The company may shed some light on its future plans regarding the development of the candidate during the third-quarter earnings release.
With no approved product in its portfolio, the company does not generate any revenue yet. However, its research and development expenses are expected to increase as it continues to invest in its pipeline.
What Our Model Indicates
Our proven model does not conclusively show that Synta is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) 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 pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at loss of 16 cents.
Zacks Rank: Although Synta’s Zacks Rank #1 enhances the predictive power of the ESP, the company’s 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. 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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