Sanofi SNY stock is down 1.8% in 2019 and has been volatile most of the year. Will this slight cumulative downtrend turn around after SNY reports Q2 earnings?
Sanofi is the fourth largest pharmaceutical company in the world by revenue, bringing in $40.9 billion last year. It is also the seventh largest by market share, with 4.11%. Sanofi specializes in seven therapeutic areas: cardiovascular, central nervous system, diabetes, internal medicine, oncology, thrombosis, and vaccines. Its subsidiary, Sanofi Pasteur, is the largest dedicated vaccine producer in the world.
Sanofi’s most popular medicines include Latnus, Placix and, Lovenox. Latnus is currently Sanofi’s most successful drug, bringing about $4.9 billion in revenue last year. It is a drug that controls blood sugar in diabetics with a once daily injection. Lovenox and Placix are anti-clotting and blood-thinning drugs respectively.
Unknown to most, Sanofi also manufactures many popular over the counter brands. Products such as Gold Bond, Rolaids, Selsun Blue, and Allegra can all be found in drug stores across the country and are steady revenue streams for Sanofi.
On Wednesday, Sanofi acquired the OTC rights to popular flu medicine, Tamiflu, from competitor Roche. Sanofi is now attempting to get Tamiflu approved by the FDA for OTC sales, hoping to cash in on convenience. Roche, meanwhile, has another flu drug in the works called Zofluza, which the company says is faster acting and stronger than Tamiflu. Therefore, it looks like it will be a battle between the two companies to see if consumers will go through the extra hassle of getting a prescription for a stronger medicine, or just chose the quicker and easier access treatment.
Our Zacks Consensus Estimate predicts Q2 revenue of $9.88 billion, a 1.24% bump over last year’s Q2 sales. For each of the past four quarters, revenues have declined year-over-year by an average of 1.4%. Hopefully, Sanofi can meet projections and have a positive quarter, which may boost SNY stock.
Although revenues have gone down the past few quarters, earnings have managed to stay in the black. Earnings have not been increasing greatly, however, with an average year-over-year jump of just 0.94% over the past 8 quarters. Earnings this quarter are projected to fall by 6.79% to $0.69. This estimate is, however, up from our $0.66 estimate 90 days ago.
Estimates for next quarter’s EPS call for 5.61% growth to $1.13 a share. This would mark an all-time high for the company. For all of 2019, estimates show just a 0.62% earnings increase from last year. Estimates also show 8.15% EPS growth for 2020, which would be the company’s largest single year EPS growth since 2008.
Since the beginning of 2019, Sanofi’s forward P/E of 12.4x has dropped relative to its peer-group, suggesting that it may currently be undervalued. Its peer-group—that includes Merck MRK, GlaxoSmithKline GSK, AbbVie ABBV, Pfizer PFE, and others—has an average forward P/E of 14.29.
The FDA accepted an application for approval of Sanofi’s relapsed/refractory multiple myeloma drug, isatuximab. This drug has undergone successful phase III trials and is still in other clinical trials to possibly treat other types of hematologic malignancies and solid tumors.
Sanofi has a strong pipeline in addition to isatuximab. It includes several new biologics and vaccines in late-stage development. A promising pipeline is always important for drug companies, as investors need to see how strong the future of the company looks after current patents inevitably run out.
Sanofi currently holds a Zacks Rank #2 (Buy), due to upward earnings estimate revisions for this fiscal year and next. Sanofi likely won’t report stellar earnings when it releases its quarterly results before the market opens on Monday, July 29. But with a strong pipeline in development and possible OTC Tamiflu boosting future revenues, Sanofi has strong potential to raise earnings over the coming quarters and into 2020.
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