What's in Store for Conatus (CNAT) This Earnings Season? - Analyst Blog
Conatus Pharmaceuticals Inc. CNAT is set to report second-quarter 2015 results on Aug 5. Last quarter, the company posted a negative earnings surprise of 8.57%. The company has delivered positive surprises in three of the last four quarters with an average beat of 9.30%. Let’s see how things are shaping up for this announcement.
Factors at Play
Conatus, a biotechnology company, currently has no approved product in its portfolio. Hence, the prime focus is on its lead candidate, emricasan, which is being developed for the treatment of patients with chronic liver disease.
Research and development expenses are expected to increase in the second quarter as Conatus continues to invest in the development of emricasan for a number of liver diseases. Conatus is evaluating emricasan in patients with nonalcoholic fatty liver disease (NAFLD), including a subset of NAFLD patients with nonalcoholic steatohepatitis, liver cirrhosis, portal hypertension and post liver transplant clearance of hepatitis C virus infection.
The liver disease market is extremely crowded with the presence of established players like Gilead Sciences GILD. We expect investor focus to remain on emricasan going forward.
What Our Model Indicates
Our proven model does not conclusively show that Conatus 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 post an earnings beat. 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 a loss of 31 cents per share.
Zacks Rank: Conatus currently carries a Zacks Rank #3 (Hold). Although the company’s Zacks Rank #3 enhances the predictive power of the ESP, the company’s ESP of 0.00% makes a 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.
The Earnings ESP for Immune Design Corp. IMDZ is +20.41% and it carries a Zacks Rank #3. The company is expected to release results on Aug 13.
Momenta Pharmaceuticals Inc. MNTA has an Earnings ESP of + 74.36% and carries a Zacks Rank #3. The company is expected to release results on Aug 4.
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CONATUS PHARMA (CNAT): Free Stock Analysis Report
GILEAD SCIENCES (GILD): Free Stock Analysis Report
MOMENTA PHARMA (MNTA): Free Stock Analysis Report
IMMUNE DESIGN (IMDZ): Free Stock Analysis Report
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