The fourth-quarter earnings season has crossed the half way mark. Per the latest Earnings Trend report, total earnings for the medical sector are up 11.3% from the same period last year on 8.4% higher revenues so far.
The current year got off to a flying start for the drugs/biotech industry. Bristol-Myers Squibb Company BMY, one of the largest pharma giants, announced that it will acquire the leading biotech company Celgene for a whopping $74 billion in what could be one of the largest buyout deals inked of late. Following suit, another large-cap pharma company Eli Lilly LLY is all set to purchase Loxo Oncology for $8 billion to broaden its oncology portfolio. Meanwhile, Japan-based Takeda Pharmaceutical completed its takeover of the Irish company Shire plc.
The landscape in the drug/biotech sector is rapidly changing. A slowdown in mature products due to intense competition and the rise of biosimilars has forced most pharma bigwigs to eye lucrative integrations to bolster their pipelines. Small tuck-in consolidations are quite frequent too. While amalgamation of complementary product portfolios and overlapping arms are a key reason for mega deals, smaller biotechs are generally bought owing to innovative platforms.
Meanwhile, the Trump government’s focus on high drug prices might propel companies to slash prices of key drugs. Incidentally, issues like government scrutiny of high prices, pricing and competitive pressure, sluggish sales of some of the most high-profile older drugs and major pipeline setbacks will persistently weigh on the industry. However, most companies seem to have combated the pressure, courtesy of new drug approvals.
Among the companies that have already reported, Celgene and Alexion reported better-than-expected results for the fourth quarter of 2018. Vertex and Biogen too beat on earnings and sales. However, results were mixed for Gilead Sciences, Inc. as the company missed on earnings but beat on sales.
How to Pick Potential Q4 Winners?
While maximum big shots from the drug/biotech sector have already announced results, there are a few companies, poised to surpass on the fourth quarter’s key metrics. However, given the huge count of drug/biotech firms, the process of selecting stocks with beat prospects could appear cumbersome.
By means of the Zacks Stock Screener, we have zeroed in on five drug/ biotech stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. These are valuable tools for investors hunting stocks with potential to outpace on earnings. Moreover, stocks with a top Zacks Rank and a positive ESP have 70% chance to deliver a positive surprise in the ongoing reporting cycle. While you can see the complete list of today’s Zacks #1 Rank stocks here, you can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Bet on These 5 Stocks for Robust Returns
Acadia Pharmaceuticals Inc. ACAD has an Earnings ESP of +3.39% and a Zacks Rank #3. The Zacks Consensus Estimate for fourth-quarter 2018 is pegged at a loss of 55 cents. The company has average trailing four-quarter positive surprise of 6.77%. It is scheduled to release financial figures on Feb 28.
Recro Pharma, Inc. REPH has an Earnings ESP of +3.03% and a Zacks Rank #2. The Zacks Consensus Estimate for fourth-quarter 2018 stands at a loss of 74 cents. The company has average earnings surprise of 23.4% in the last four reported quarters. It is scheduled to report earnings numbers on Feb 19.
Pacira Pharmaceuticals, Inc. PCRX has an Earnings ESP of +32.24% and a Zacks Rank of 3. The Zacks Consensus Estimate for fourth-quarter 2018 is pegged at 25 cents. The company came up with average beat of 164.8% in the previous four reported quarters.
Puma Biotechnology, Inc PBYI has an Earnings ESP of +0.54% and is a #3 Ranked stock. The Zacks Consensus Estimate for fourth-quarter 2018 is pegged at a loss of 92 cents. The company has average trailing four-quarter positive surprise of 67.31%. It is scheduled to report results on Feb 28.
Epizyme, Inc. EPZM has an Earnings ESP of +7.93% and is a Zacks #3 Ranked player. The Zacks Consensus Estimate for fourth-quarter 2018 is pegged at a loss of 49 cents. The company pulled off average positive surprise of 11.97% in the preceding four reported quarters.
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Eli Lilly and Company (LLY) : Free Stock Analysis Report
Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
Epizyme, Inc. (EPZM) : Free Stock Analysis Report
Puma Biotechnology, Inc. (PBYI) : Free Stock Analysis Report
ACADIA Pharmaceuticals Inc. (ACAD) : Free Stock Analysis Report
Pacira Pharmaceuticals, Inc. (PCRX) : Free Stock Analysis Report
Recro Pharma, Inc. (REPH) : Free Stock Analysis Report
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