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What's in Store for Vericel (VCEL) This Earnings Season?

Zacks Equity Research

Vericel Corporation VCEL is scheduled to report its fourth-quarter 2018 and full-year earnings results on Feb 26, 2019 before market open.

The company’s track record has been impressive so far, having surpassed estimates in three of the trailing four reported quarters while matching the same on one occasion, the average positive surprise being 54.88%. In the last reported quarter, Vericel came up with a beat of 81.82%.

Shares of Vericel have skyrocketed 162.9% in the past year against the industry’s decrease of 17.7%.

 

Let’s see how things are shaping up for this quarter to be reported.

Factors to Consider

Vericel’s top line consists of sales from its two marketed products, namely MACI and Epicel. Sales of both have increased year over year and sequentially in the third quarter of 2018. We expect this positive trend to continue in the fourth quarter as well. The company plans to raise MACI sales force by 20%, adding a sixth sales region in 2019.

MACI (autologous cultured chondrocytes on porcine collagen membrane) was approved by the FDA in December 2016. It is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults.

Vericel is focused on its goal of training approximately 900 surgeons by the end of the fourth quarter 2018, up from 500 trained practitioners at the end of 2017. The company also plans to expand MACI manufacturing capacity to meet growth in demand for the medicine. We expect management to provide an update on the same on fourth-quarter conference call.

Epicel (cultured epidermal autografts) is a permanent skin replacement Humanitarian Use Device (HUD) used for treating patients with deep-dermal or full-thickness burns comprising greater than or equal to 30% of total body surface area (TBSA).

Last month, Vericel announced encouraging outcomes data for 954 burn patients treated with Epicel. The results showed that patients treated with Epicel experienced a higher survival rate compared with the data posted for patients at the National Burn Repository with comparable burns. The findings were published in the Journal of Burn Care and Research.

However, during third-quarter investor call, Vericel stated that it does not expect significant growth for Epicel sales in the fourth quarter as compared to the previous reported quarters. It also said that revenues in the impending quarterly release will be entirely driven by MACI. We expect management to publish further news on the same on the upcoming earnings call.

Earnings Whispers

Our proven model does not conclusively show that Vericel is likely to beat estimates this quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a 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: Vericel has an Earnings ESP of -11.11%, representing the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate wherein the former stands at 4 cents while the latter is pegged at 5 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Vericel carries a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s negative ESP leaves surprise prediction inconclusive as only a positive ESP in the combination can significantly raise the odds of a likely earnings surprise.

We caution against Sell-rated stocks (#4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Vericel Corporation Price and EPS Surprise

Vericel Corporation Price and EPS Surprise | Vericel Corporation Quote

Stocks That Warrant a Look

Here are a few health care stocks that you may want to consider as our model shows that these have the right mix of elements to beat on earnings this reporting cycle.

Aduro Biotech, Inc. ADRO has a Zacks Rank of 2 and an Earnings ESP of +15.23%. You can see the complete list of today’s Zacks #1 Rank stocks here.

BioDelivery Sciences International, Inc. BDSI is scheduled to release fourth-quarter results on Mar 14. The company has an Earnings ESP of +38.46% and a Zacks Rank of 1.

Cara Therapeutics, Inc. CARA is a Zacks #2 Ranked player and has an Earnings ESP of +11.36%.

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