4 Drug/Biotech Stocks Set To Outpace Q4 Earnings Estimates

While almost all big drugmakers have reported their results, several smaller drug and biotech companies are yet to report this earnings season. As far as the large drug/biotech companies are concerned, the fourth-quarter earnings season has been a mixed bag. While Lilly, Gilead, AstraZeneca, Regeneron, and J&J beat estimates for both earnings and sales, Merck, Sanofi, and Novartis missed on both counts. Others like Pfizer, Biogen, and Glaxo missed estimates for earnings while beating the same for sales.

Sales of some drugs/vaccines/products were hurt by the coronavirus pandemic, mostly in the first half of 2020 with some recovery trends observed in the second half of the year.

Per the Zacks classification, the pharma/biotech industry comes under the broader Medical sector, which comprises pharma/biotech as well as medical device companies.

Per the Earnings Trends report as of Feb 17, 85.5% of the companies in the Medical sector, constituting nearly 93.5% of the sector’s market capitalization, reported earnings. While 78.7% beat earnings estimates, 85.1% beat the same for sales. Earnings increased 16.8% year over year on 13.3% higher revenues. Overall, fourth-quarter earnings for the Medical sector are expected to rise 14.6% on a 12.9% sales increase.

Zeroing in on Winners

Here we have highlighted four-drug/biotech companies, which are expected to deliver an earnings surprise in their upcoming quarterly results.

Earnings ESP is our proprietary methodology for determining the stocks that have the best chance to deliver an earnings surprise. Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. The selection can be done with the help of the Zacks Stock Screener.

Our research shows that for stocks with this combination, the chance of an earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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