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Will Alexion's (ALXN) Earnings Streak End?

Zacks Equity Research

Alexion Pharmaceuticals, Inc. (ALXN) is set to report fourth quarter 2013 results before the opening bell on Jan 30. In the preceding quarter, Alexion delivered a positive 2.82% earnings surprise - the twelfth consecutive outperformance– driven by the continued strong performance by Alexion’s sole marketed drug, Soliris. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Soliris is expected to continue its strong performance in the fourth quarter as well. Soliris is available in the U.S, EU, Japan and many other countries for the treatment of paroxysmal nocturnal hemoglobinuria (:PNH). PNH is a rare genetic blood disorder. Sales of the drug have been boosted further by its label expansion into the aHUS indication in the U.S. (Sept 2011) and the EU (Nov 2011). Japanese approval for Soliris in the aHUS indication came in Sep 2013.

The bottom line is however expected to be affected by higher operating costs as Alexion continues to invest in its pipeline. Alexion Pharma is expecting six product approvals within the time period of 2014 to 2018 including asfotase alfa (hypophosphatasia), ALXN 1101 (MoCD type A) and Soliris’ label expansion. Moreover, operating expenses will also move up in the final quarter of 2013 due to Alexion’s efforts to expand.

Earnings Whispers?

Our proven model does not conclusively show that Alexion is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately this is not the case here as elaborated below.

Negative Zacks ESP: This is because the Most Accurate estimate stands at 71 cents, while the Zacks Consensus is higher at 73 cents. This results in a difference of -2.74%.

Zacks Rank #3 (Hold): Alexion’s Zacks Rank #3 (Hold), however, increases the predictive power of ESP. That said, we also need to have a positive ESP to be confident of an earnings surprise call.

We caution against stocks with Zacks Rank #4 and 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that they have the right combination of elements, i.e., a positive Zacks Earnings ESP and a Zacks Rank #1, #2 or #3:

Actavis (ACT) has an Earnings ESP of +0.33% and holds a Zacks Rank #1 (Strong Buy). Actavis will be reporting fourth quarter earnings on Feb 20.

Biogen Idec Inc. (BIIB) has an Earnings ESP of +9.01% and holds a Zacks Rank #2 (Buy). Biogen will be reporting fourth quarter earnings on Jan 29.

Sanofi (SNY) has earnings ESP of +2.27% and holds a Zacks Rank #3. Sanofi will report fourth quarter earnings on Feb 6.

Read the Full Research Report on ALXN
Read the Full Research Report on SNY
Read the Full Research Report on BIIB
Read the Full Research Report on ACT

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