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WIll Allergan (AGN) Beat Estimates This Earnings Season?

Zacks Equity Research

We expect Allergan plc AGN to beat expectations when it reports third-quarter 2019 results on Nov 5. In the last reported quarter, the company delivered a positive earnings surprise of 0.92%.

Allergan’s share price has risen 31.8% this year so far against the industry’s decrease of 2.8%.

 

 

Allergan’s earnings performance has been strong, with the company beating expectations in each of the past four quarters. The average positive earnings surprise over the last four quarters is 4.26%.

Allergan plc Price and EPS Surprise

 

Allergan plc Price and EPS Surprise

Allergan plc price-eps-surprise | Allergan plc Quote

Factors to Consider

Sales in the third quarter are likely to have been hurt by loss of exclusivity on some brands, divestitures of some brands in 2018 and lower sales of textured breast implants due to a global recall. Like the previous couple of quarters, sales of blockbuster drug Restasis may have declined in the quarter.

Nonetheless, key products like Botox (both cosmetic and therapeutic), Juvéderm collection of fillers, Vraylar, Ozurdex and Lo Loestrin are likely to have supported sales growth in the quarter.

Importantly, in May, Allergan gained FDA approval for the new indication of bipolar depression for Vraylar. Investors will be keen to know the contribution of this label expansion to sales of the drug in the quarter to be reported

In August, Allergan entered into a settlement with two Ohio plaintiffs in connection with the federal multidistrict litigation related to abuse of opioid-based drugs. Allergan has agreed to pay $5 million to resolve all claims pertaining to the scheduled trial. Investors will throw questions at Allergan management for any updates on the issue.

Importantly, in June, Allergan announced that it has entered into a definitive transaction to be acquired by AbbVie ABBV in a cash-and-stock deal worth nearly $63 billion. Last month, Allergan’s shareholders gave green signal to the pending merger. Some questions on the progress of the merger deal are expected on the third-quarter conference call.

Earnings Whispers

Our proven model predicts an earnings beat for Allergan in the soon-to-be-reported quarter because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely positive surprise.

Earnings ESP: Allergan’s Earnings ESP is +2.51% as the Zacks Consensus Estimate of $4.25 is lower than the Most Accurate Estimate of $4.36. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Allergan has a Zacks Rank #2.

Other Stocks to Consider

Here are a few other healthcare stocks worth considering as our model shows that these have the right mix of elements to beat estimates this time around.

Jazz Pharmaceuticals JAZZ has an Earnings ESP of +1.70% and is Zacks #2 Ranked. The company is scheduled to release results on Nov 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Portola Pharmaceuticals PTLA has an Earnings ESP of +6.33% and a Zacks Rank of 1. The company is scheduled to release results on Nov 5.

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