It has been a pretty bad start to 2015, with most stocks sinking to begin the New Year. This has left investors looking to more defensive sectors which can hold up in this type of market environment.
Health care is definitely one such sector and it is actually one of the two top performing segments over the past 52 weeks. This makes the space an ideal area to look for both outperforming stocks, and ones that can do well in the upcoming earnings season.
Fortunately, we have found two such stocks in the pharmaceutical sector which are both poised to see an earnings beat this quarter, and may be able to outperform a rocky market as well. Below, we highlight the duo of potential earnings winners which should satisfy both large cap investors, and those who are looking to take a bit more risk in this space:
ISIS Pharmaceuticals (ISIS - Analyst Report)
ISIS Pharmaceuticals is a company that has seen its shares surge over the past two years. There is seemingly much more room for growth, as ISIS is one of the few stocks that is up so far in 2015, thanks largely to its 10.75% gain in Monday trading. Indeed, the ushering in of a new year hasn’t slowed down any of the positive momentum this drug company has been building since the latter half of 2014.
ISIS has been given a Zacks Expected Surprise Prediction of 144.44%. This means that the most recent earnings estimates for ISIS have been overwhelmingly positive, and that another beat could be on the way. Luckily, ISIS posts its earnings on 2/27/15 so there is still plenty of time before the next report.
Although the numbers above look promising, this stock has a Zacks Rank #3 (hold). This puts ISIS in the middle of the road in terms of stocks and their earnings estimate revisions. However, the main reason for the ISIS stock surge on Monday was thanks to a new deal with Johnson & Johnson (JNJ - Analyst Report).
Should this new agreement boost prospects for ISIS, we could this company move into ‘buy’ rank territory before long. Just keep in mind that ISIS has a beta of 1.58, so you should expect more volatility here than with the average stock.
Eli Lilly (LLY - Analyst Report)
Eli Lilly is a large cap pharmaceutical company that has participated in many critical breakthroughs in modern healthcare. The company was the first to ever mass produce penicillin, and was among the first companies to produce human insulin. Since then, the company has been working hard to advance modern healthcare as we’ve come to know it.
Paying a solid dividend of 2.83%, Eli Lilly & Co. attracts investors across the board. This comes as no surprise given the fact that it is a large cap pharmaceutical company, with a sizeable market cap of about $77 billion. Additionally, a part of why investors like this company is because it has managed to grow steadily, regardless of volatile times the market has endured. Indeed, with a beta of 0.42, this company experiences significantly less volatility than the market.
Eli Lilly has been making moves in the New Year, recently acquiring Novartis’ animal health division. On the 4th of January, Eli Lilly & Co. successfully sold two of its sentinel line products for a sum of $410 million.
With an earnings date around the corner (1/30/15), analysts in the Zacks Consensus Estimate believe the company will post expected EPS Growth of 6.83%, while the most recent estimates have been especially strong It also helps that the company has a positive Expected Surprise Prediction from Zacks of 1.37% which can help to indicate a beat at earnings season.
Perhaps the most significant news about this company is the fact that its Zacks Rank has increased since last week. The company has moved up from a Zacks Rank #3 (hold), to a Zacks Rank #2 (buy). This means that analysts have a favorable outlook for LLY compared to its peers in the near term, suggesting that the company could be a solid bet in the near term, and especially so when you combine this buy rank with its positive Earnings ESP.
Bottom Line
Either of these two stocks could make for an interesting pick in the health care space right now, and especially if the market’s path remains uncertain. And best of all, both are looking quite promising for the upcoming earnings season, a time which could be especially dicey for many companies this time around.
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