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Drug/Biotech Stocks Q3 Earnings on Oct 25: AMGN, GSK, VRTX

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The third-quarter reporting cycle is in full swing. Corporate earnings have been reassuring so far this quarter and we expect the momentum to continue going ahead.

As of Oct 20, 2017, 87 S&P 500 members, accounting for 24.7% of the index’s total market capitalization, have reported results, according to Earnings Preview.

Total earnings of these 87 index members were up 9.4% from the year-ago quarter on a 7.3% improvement in revenues. The growth in revenues is impressive, ahead of the previous quarter’s growth of 4.4% and significantly higher than the 12-quarter average of 1.1%. The beat ratio was 71.3% for earnings and 70.1% for revenues. More than half of the 87 companies have beaten both EPS and revenue estimates.

Per the report, total earnings of the S&P 500 companies in the third quarter are expected to grow 2.6% year over year on 5% higher revenues. Meanwhile, the broader Medical sector (includes drug, biotech as well as Medical Device companies) is expected to record year-over-year growth of 4.8% in revenues and 2.2% in earnings in Q3.

Only two big names in the biotech/pharma sector have reported thus far — Johnson & Johnson JNJ and Swiss-based Novartis AG NVS. J&J’s Q3 results were better than expected and the company raised its sales and profit outlook for this year as well. Novartis also beat estimates for both revenues and earnings this quarter.

Let’s take a look at three pharma/biotech companies that are set to report third-quarter results on Oct 25.

Amgen Inc. (AMGN)

Amgen, which is scheduled to release earnings after market closes, had delivered a positive earnings surprise of 5.83% last quarter. Amgen beat expectations in the last four quarters with an average positive surprise of 5.85%.

For this quarter, Amgen has an Earnings ESP of -0.41% and a Zacks Rank #3 (Hold). This does not conclusively show that Amgenis likely to beat estimates this quarter. The Zacks Consensus Estimate is pegged at $3.09 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Higher demand for Amgen’s new drugs is expected to offset lower sales of its mature brands. The company’s key drug, Neulasta, is facing competition from newer cancer therapies. The threat of biosimilars also lurks as several companies are looking to launch generic version of the drug. (Read More: What's in the Cards for Amgen this Earnings Season?)

GlaxoSmithKline plc (GSK)

London, U.K. based Glaxo is scheduled to announceresults before the opening bell tomorrow.Glaxo has beaten estimates in three of the last four quarters and met the same in one, resulting in an average positive surprise of 8.34%. In the last reported quarter, Glaxo delivered a positive surprise of 2.94%.

The company has an Earnings ESP of +1.28% and a Zacks Rank #3, which indicates that it is poised to deliver a beat this time around.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Glaxo’s HIV products are expected to drive sales for the pharmaceutical segment this quarter. Moreover, the newly launched respiratory drugs are expected to offset declining sales of Seretide, Advair and Avodart. Meanwhile, the slowdown in consumer segment due to market conditions and the impact of divestures is expected to continue. (Read More: Glaxo Q3 Earnings: Will it Deliver a Beat Yet Again?)

Vertex Pharmaceuticals Incorporated (VRTX)

The company, which specially focuses on cystic fibrosis ("CF"), will report results tomorrow after market closes. In the last quarter, Vertex delivered a positive earnings surprise of 11.43%. The company came up with an average positive earnings surprise of 17.91% in the trailing four quarters. The company has an Earnings ESP of +7.24% and a Zacks Rank #3, indicating a likely positive surprise. The Zacks Consensus Estimate is pegged at 37 cents per share.

The approval for two label expansions of CF drug, Kalydeco, in the United States in May and August has broadened the patient population, which can drive sales of the drug. Moreover, the re-imbursement agreements in Ireland and Italy for Orkambi are also a positive. (Read More: Is a Beat in the Cards for Vertex in Q3 Earnings?)

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Novartis AG (NVS) : Free Stock Analysis Report
 
Johnson & Johnson (JNJ) : Free Stock Analysis Report
 
GlaxoSmithKline PLC (GSK) : Free Stock Analysis Report
 
Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
 
Amgen Inc. (AMGN) : Free Stock Analysis Report
 
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