The first-quarter earnings season is picking up pace with several big names expected to report this week. Overall expectations for this quarter are not too high given the volatility in oil prices, unfavorable currency movement, China, sluggishness in other emerging markets, and geopolitical tensions.
According to our Earnings Trends report, Q1 results from 32 S&P 500 members are out with total earnings from these members declining 6.8% from the year-ago period with revenues growing 0.9%.
This shows weaker earnings and revenue growth from these 32 index members compared to their performance in other recent reporting cycles. But this was only expected — total S&P 500 earnings for the first quarter are expected to decline 10.3% making it the 4th quarter in a row of negative earnings growth for the index. Revenues are anticipated to decline 0.6%.
What's in Store for Drug Stocks?
Despite having its own share of challenges like drug pricing issues as well as a changing competitive scenario including biosimilar competition, Medical is one of the few sectors expected to fare better than many of its counterparts this quarter – earnings growth of 0.9% and top-line growth of 9.1%.
With industry bellwether Johnson & Johnson JNJ slated to report tomorrow, let’s see how it unfolds for J&J and other drug companies expected to report their first-quarter numbers on Tuesday, Apr 19.
Johnson & Johnson, which had delivered an earnings beat in the last reported quarter, has a diversified business model with a presence in three segments: Consumer, Pharmaceutical and Medical Devices.
While pharma drugs like Stelara, Imbruvica, Xarelto and Invega Sustenna are expected to do well, the Medical Device business will remain under pressure with several markets in this segment facing challenges. The consumer segment, which is slowly recovering from the impact of manufacturing issues, is experiencing market pressure in China. While currency will continue to have an unfavorable impact, share buybacks should boost the bottom line.
J&J has an Earnings ESP of +1.22% and a Zacks Rank #2 (Buy). The Zacks Consensus Estimates for Q1 earnings is $1.64 per share (Read more: Will J&J Pull a Surprise Again in Q1 Earnings?).
Dublin, Ireland-based Perrigo Company plc PRGO has a diversified revenue stream – the company has a presence in the OTC market and sells generic and specialty pharma drugs as well.
Perrigo, which missed expectations in the fourth quarter, expects earnings to grow in the low single digits in Q1. Moreover, the Mar 2015 Omega Pharma acquisition is expected to impact the year-over-year earnings per share comparison.
Perrigo has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimates for Q1 earnings is $1.92 per share (Read more: Will Perrigo Surprise Earnings Estimates in Q1?).
Keep an eye on our full earnings release articles for these stocks.
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