Will Amgen (AMGN) Keep the Earnings Streak Alive in 4Q? - Analyst Blog
Biotech major, Amgen (AMGN), will be reporting fourth quarter and full year 2014 results on Jan 27 after the market closes.
Amgen’s track record has been pretty good in the last three quarters with the company beating earnings estimates consistently. The average earnings surprise over the last four quarters is 10.97%. However, will Amgen be able to maintain this earnings streak in the fourth quarter as well?
Factors at Play
Revenues should be driven by products like Xgeva, Kyprolis and Enbrel. Meanwhile, with the company gearing up for quite a few product launches this year, fourth quarter 2014 operating expenses will pick up.
As far as currency is concerned, even though companies like Johnson & Johnson (JNJ) were hard hit by unfavorable currency movement, Amgen had mentioned on its third quarter 2014 call that it has a fairly limited exposure as a company to currency movements given the profile of the business. At that time, the company had guided to a 2 cent negative currency impact on fourth quarter results. The bottom-line will continue to be driven by the company’s overall cost-cutting efforts and share buybacks.
Amgen has already provided a strategic review and its preliminary outlook for 2015. On the fourth quarter call, a lot of focus will be on the company’s pipeline. The company’s pipeline is progressing with three candidates (evolocumab – dyslipidemia, ivabradine – chronic heart failure, talimogene laherparevec – metastatic melanoma) under regulatory review and important late-stage data readouts lined up for 2015 and 2016.
Investors will also be interested in Amgen’s take on Sandoz, Novartis’ (NVS) generic arm’s progress with its biosimilar version of Amgen’s Neupogen. Earlier this year, the FDA’s advisory panel voted in favor of approving Sandoz’s product.
What Our Model Indicates
Our proven model does not conclusively show that Amgen is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for increasing the odds of an earnings surprise. Unfortunately, this is not the case as elaborated below.
Zacks ESP: The Earnings ESP for Amgen is -1.95%. This is because the Most Accurate estimate is $2.01 while the Zacks Consensus Estimate is $2.05 per share.
Zacks Rank: AMGN’s Zacks Rank #1 (Strong Buy) increases the predictive power of ESP. But we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks That Warrant a Look
Here is a stock that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter.
AbbVie (ABBV) has an Earnings ESP of +1.18% and carries a Zacks Rank #2 (Buy). It is scheduled to report results on Jan 30.
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