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What's in the Cards for Perrigo (PRGO) This Earnings Season?

Zacks Equity Research

Perrigo Company plc PRGO is scheduled to report first-quarter 2019 results after market close on May 8.

The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters and missed the same once with the average positive surprise being 3.54%.

Shares of the company have gained 28.3% so far this year compared with the industry’s increase of 11.2%.

 

In the last reported quarter, Perrigo delivered a negative earnings surprise of 1.02%

Let’s see how things are shaping up for the upcoming announcement.

Factors Likely to Influence Results

Perrigo is focused on growth of Consumer Healthcare Americas segment through switching of prescription drugs to over-the-counter (“OTC”) brands and expansion of store brand solution. The OTC version of several drugs and generic drugs launched over the past few quarters will continue to boost the company’s top line in the soon-to-be reported quarter.

However, the company’s ongoing patent litigations related to several drugs may increase expenses in the first quarter.

The new products in the Consumer Healthcare Americas business and Consumer Health Care International segment saw improved sales in the fourth quarter of 2018– a trend expected to continue this quarter. However, declining sales at animal health business and loss of sales from discontinued products may offset the gain from new products.

The company is likely to record a milestone payment of $250 million from Royalty Pharma related to contingent payments for Tysabri during the quarter. This will likely boost the company’s top line in the first quarter.

The ongoing restructuring initiatives and operating expense discipline are anticipated to save expenses and cushion the company’s bottom line.

Last year, the company had announced its plan to spin-off its Rx business to create value for shareholders and focus on expanding its leading consumer business. The segment has been facing declining sales due to delay in launch of products and price erosion. On the earnings call, we expect the company to provide an update on the progress of the plan to spin-off Rx business as well as the benefits arising from focusing on the OTC market.

Earnings Whispers

Our proven model does not conclusively show that Perrigo is likely to beat estimates this reporting cycle. This is because a stock needs to have both a positive Earnings ESP and a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (90 cents) and the Zacks Consensus Estimate (94 cents) is -4.28%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Perrigo carries a Zacks Rank #5 (Strong Sell).

Note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Perrigo Company plc Price and Consensus

 

Perrigo Company plc Price and Consensus | Perrigo Company plc Quote

Stocks That Warrant a Look

Here are some biotech stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Horizon Pharma HZNP has an Earnings ESP of +25.00% and a Zacks Rank #3. The company is scheduled to release first-quarter results on May 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clovis Oncology, Inc. CLVS has an Earnings ESP of +5.45% and a Zacks Rank #2. The company is scheduled to release first-quarter results on May 7.

Aduro Biotech, Inc. ADRO has an Earnings ESP of +82.00% and a Zacks Rank #2.

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Perrigo Company plc (PRGO) : Free Stock Analysis Report
 
Horizon Pharma Public Limited Company (HZNP) : Free Stock Analysis Report
 
Clovis Oncology, Inc. (CLVS) : Free Stock Analysis Report
 
Aduro Biotech, Inc. (ADRO) : Free Stock Analysis Report
 
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