Endo International, Inc. ENDP is scheduled to report fourth-quarter 20Array5 results on Feb 29.
Endo’s track record has been pretty impressive. The company has beaten estimates in three of the last four quarters, with an average positive earnings surprise of 0.Array%. Last quarter, the company had posted a positive earnings surprise of 2.0%.
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 these factors to continue boosting performance in the fourth quarter.
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 injectables, 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 in order to focus on its core business.
The approval of Belbuca was a major positive for the company. Revenues from the product could offset the impact of genericization faced by some key drugs at Endo including Lidoderm. Following the approval, Endo is conducting a strategic portfolio optimization process to expand its pain sales force and reallocate resources across key growth products in the U.S. Branded Pharmaceuticals business, which could keep the bottom line under pressure.
For 20Array5, 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 20Array6, Endo expects earnings per share in the range of $5.85 to $6.Array5.
Why a Likely Positive Surprise?
Our proven model shows that Endo is likely to beat earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #Array (Strong Buy), #2 (Buy) or #3 (Hold) to likely post an earnings beat, and Endo has the right mix.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.97%. This is a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Endo currently carries a Zacks Rank #3. The combination of Endo’s Zacks Rank #3 and positive ESP makes us reasonably confident of an earnings beat this season.
Conversely, Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks That Warrant a Look
Here are a few other health care stocks that you may want to consider, as our model shows that they also have the right combination of elements to post an earnings beat this quarter:
The Earnings ESP for Aduro BioTech, Inc. ADRO is +27Array.43% and it carries a Zacks Rank #2. The company is expected to release results on Feb 29.
Achillion Pharmaceuticals, Inc. ACHN has an Earnings ESP of +6.25% and a Zacks Rank #2. It is expected to release results on Mar 3.
Valeant Pharmaceuticals International, Inc. VRX has an Earnings ESP of +0.77% and a Zacks Rank #2. It is expected to release results on Feb 29.
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