As we near the end of the ongoing earnings season, we see that the scorecard for the Medical sector has been pretty decent. The sector primarily comprises pharma/biotech and medical device companies.
Per the Earnings Trends report, as of Aug 9, 91.4% of the companies in the Medical sector, constituting nearly 96% of the sector’s market capitalization, reported earnings. While 86.8% beat estimates on earnings, 77.4% beat the same for sales. Earnings declined 30.7% year over year but revenues increased 5%. Overall, second-quarter earnings for the Medical sector are expected to decline 30% despite a 5.4% sales increase.
Almost all the large biotech companies have already reported second-quarter results. Their performance has been good. Some bigwigs upped their annual guidance. Gilead’s second-quarter earnings were hit by legal charges but revenues increased. The company raised its revenue guidance. Biogen reported better-than-expected second-quarter 2023 results as earnings and sales both beat estimates. The company, however, maintained its previously issued earnings and sales guidance for 2023. GSK plc GSK came up with strong second-quarter 2023 results and raised its outlook for 2023. Bristol Myers, however, reported lower-than-expected results for the second quarter of 2023 and cut its annual outlook.
Zeroing in on Winners
There are a handful of companies due to report. Some of them seem poised to surpass on the key metrics for the quarter. Here we have highlighted three drug/biotech companies, Legend Biotech Corporation LEGN, Kodiak Sciences Inc. KOD and Galera Therapeutics, Inc. GRTX, which are expected to deliver an earnings surprise in their upcoming quarterly results.
Earnings ESP is our proprietary methodology for determining the stocks with the best chance to deliver an earnings surprise. Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. The selection can be made with the help of the Zacks Stock Screener.
Our research shows that for stocks with this combination, the chance of an earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
3 Biotech Stocks That Match the Criteria
The company develops advanced cell therapies across a diverse array of technology platforms, including autologous and allogeneic chimeric antigen receptor T-cell and natural killer (NK) cell-based immunotherapy. The company has made good progress with its approved drug Carvykti. In June, Legend Biotech submitted a supplemental biologics license application to the FDA to expand the drug’s label to include the treatment of adult patients with relapsed and lenalidomide-refractory multiple myeloma who have received at least one prior line of therapy, including a proteasome inhibitor and an immunomodulatory agent.
Legend Biotech has an Earnings ESP of +8.26% and a Zacks Rank #2. The Zacks Consensus Estimate for the second quarter stands at a loss of 69 cents per share.
LEGN beat estimates in the last reported quarter by 28.57%. The company is scheduled to report second-quarter results on Aug 15.
Legend Biotech Corporation Sponsored ADR Price, Consensus and EPS Surprise
Legend Biotech Corporation Sponsored ADR price-consensus-eps-surprise-chart | Legend Biotech Corporation Sponsored ADR Quote
It has an Earnings ESP of +14.05% and a Zacks Rank #3. The Zacks Consensus Estimate for the second quarter stands at a loss of $1.23 per share.
Kodiak Sciences develops therapeutics to treat high-prevalence retinal diseases. The company’s first-in-class bispecific investigational medicine, targeting both IL-6 (anti-IL-6 antibody) and VEGF (VEGF-trap), KSI-501, is being investigated in an early-stage study in patients with diabetic macular edema. Last month, it decided to discontinue further development of tarcocimab based on data from GLEAM and GLIMMER studies. Further updates on the same are expected on the second-quarter earnings call.
Kodiak Sciences beat estimates in three of the last four quarters and missed in the remaining one, delivering an average earnings surprise of 7.50%.
Kodiak Sciences Inc. Price, Consensus and EPS Surprise
Kodiak Sciences Inc. price-consensus-eps-surprise-chart | Kodiak Sciences Inc. Quote
It is a clinical-stage biopharmaceutical company focused on developing and commercializing a pipeline of novel, proprietary therapeutic candidates for cancer.
Last week, the company received a complete response letter (CRL) from the FDA regarding the company’s new drug application (NDA) for avasopasem manganese (avasopasem) for radiotherapy-induced severe oral mucositis in patients with head and neck cancer undergoing standard-of-care treatment.
Galera Therapeutics, Inc. Price, Consensus and EPS Surprise
Galera Therapeutics, Inc. price-consensus-eps-surprise-chart | Galera Therapeutics, Inc. Quote
The NDA was accepted in February. The FDA stated that the results from the late-stage ROMAN trial, along with the supporting data from the GT-201 trial, are not sufficiently persuasive to establish substantial evidence of avasopasem’s effectiveness and safety for reducing severe oral mucositis in patients with head and neck cancer in the CRL. Consequently, the regulatory body asked for results from an additional clinical trial for resubmission. The further course of action on this regulatory update is expected along with second-quarter results.
Galera has an Earnings ESP of +13.95% and a Zacks Rank #3. The Zacks Consensus Estimate for the second quarter stands at a loss of 43 cents per share. Galera missed estimates in all the last four quarters, delivering an average negative earnings surprise of 23.70%.
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