Puma Biotechnology, Inc. PBYI is expected to report third-quarter 2015 results on Nov 9. Last quarter, the company had posted a negative earnings surprise of 27.22%. The four-quarter trailing average surprise is a negative 23%. Let’s see how things are shaping up for this announcement.
Factors at Play
With no approved product in its portfolio, Puma Biotechnology is not expected to record any revenue in the third quarter, as was the case in prior quarters.
The company’s operating expenses will continue to rise during the third quarter. Particularly, research and development expenses are expected to go up during the quarter as it is investing heavily in its pipeline. The company’s primary candidate, neratinib, is being evaluated for the treatment of different types of tumor in several mid- and late-stage studies.
Puma Biotechnology’s general and administrative expenses, which increased in the last couple of quarters, may rise in the third quarter as well. Higher operating expenses will continue to keep Puma Biotechnology’s bottom line under pressure.
What Our Model Indicates
Our proven model does not conclusively show that Puma Biotechnology 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) to likely beat expectations. 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 a loss of $1.70.
Zacks Rank: Puma Biotechnology currently carries a Zacks Rank #3. Although the company’s Zacks Rank #3 enhances the predictive power of the ESP, its 0.00% ESP makes surprise prediction difficult.
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.
Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and carries a Zacks Rank #3. The company is scheduled to release results on Nov 9.
Alnylam Pharmaceuticals, Inc. ALNY has an Earnings ESP of +2.13% and carries a Zacks Rank #3. The company is slated to release results on Nov 9.
The Earnings ESP for Intercept Pharmaceuticals, Inc. ICPT is +1.54% and it carries a Zacks Rank #2. The company is expected to release results on Nov 9.
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