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Key Predictions for Q3 Earnings Reports of LLY, BIIB, NVS

Zacks Equity Research
Anadarko Petroleum Corporation's (APC) Issue of 2018 Capex and sales guidance is a testament of the company's focus on making the most of its well-managed portfolio.

The third-quarter reporting cycle is off to a positive start as evident from an accelerating revenue growth trend. Meanwhile, the proportion of positive surprises is above average this quarter. Also, the estimate revision trend for the next quarter has been mostly favorable as Q4 estimates have actually gone up in the past couple of weeks.

As of Oct 20, 2017, 87 S&P 500 members, accounting for 24.7% of the index’s total market capitalization, reported results, according to the latest 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 beat ratio was 71.3% for earnings and 70.1% for revenues.

Per the report, total earnings of S&P 500 companies in Q3 are expected to grow 2.6% year over year on 5% higher revenues.

Please note that 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.

Among the biotech/pharma bigwigs, only Johnson & Johnson JNJ has reported its third-quarter results so far. J&J reported better-than-expected third-quarter 2017 results and raised its 2017 sales and profit outlook. J&J’s sales growth accelerated in the third quarter, leading the company to post its first positive sales surprise after almost a year.

Here we have three biotech/pharma giants that are set to report third-quarter results on Oct 24. Let's see how things are shaping up for this quarter.

Eli Lilly and Company LLY

Lilly, which is scheduled to release earnings before the market opens, had delivered a positive earnings surprise of 6.73% last quarter. Lilly’s earnings performance has been mixed with earnings missing expectations in two of the last four quarters while beating the same in the other two, bringing the average negative surprise to 0.89%.

For this quarter, Lilly has an Earnings ESP of -0.21% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate is pegged at $1.03 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

New products like Trulicity, Cyramza, Taltz and Jardiance have supported the top line in the past few quarters. We expect the trend to continue in the third quarter as well. However, decline in sales of Alimta, Cymbalta and Zyprexa is expected to continue due to the loss of exclusivity. (Read More: Eli Lilly to Report Q3 Earnings: What’s in Store?)

Biogen Inc. BIIB

Biogen, a well-known name in the multiple sclerosis (MS) market, is also scheduled to announce results before the opening bell. Biogen’s earnings performance has been pretty impressive so far, having delivered a positive surprise in each of the last four quarters. The average earnings beat over the last four quarters is 6.41%.

Last quarter, the company delivered a positive earnings surprise of 15.60%.

The company has an Earnings ESP of +0.84% and a Zacks Rank #3, indicating a likely positive surprise. The Zacks Consensus Estimate is pegged at $5.70 per share. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Global patient growth is likely to drive prescription trends and sales of Biogen’s MS drugs Tecfidera. However, rising competition from Roche’s RHHBY newly launched MS drug Ocrevus may hurt sales of Tysabri modestly. Investor focus will also be on Spinraza’s performance (Read More: Biogen Q3 Earnings: Will it Deliver a Beat Again?)

Novartis AG NVS

The Swiss pharma giant is expected to report before market opens. In the last quarter, Novartis delivered a positive earnings surprise of 4.31%. The company posted an average positive earnings surprise of 3.51% in the trailing four quarters. The company has an Earnings ESP of -0.96% and a Zacks Rank #3.The Zacks Consensus Estimate is pegged at $1.25 per share.

New products like Cosentyx and Entresto are expected to boost the top line. However, the loss of exclusivity of some of the key drugs in Novartis’ portfolio is expected to continue to hurt the company’s top line. Investor focus at Novartis’s Q3 earnings call will be on updates related to its newly approved CAR T therapy Kymriah for acute lymphoblastic leukemia. (Read More: What's in the Cards for Novartis This Earnings Season?)

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Roche Holding AG (RHHBY) : Free Stock Analysis Report
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