5 Big Drug/Biotech Stocks Set To Trump Q4 Earnings Estimates

The fourth-quarter earnings season for pharma stocks has started with Johnson & Johnson reporting fourth-quarter results before market open. Pharma stocks include large and small drug makers as well as biotechs focused on developing novel therapies. These stocks form part of the wider Medical sector, which comprises pharma/biotech as well as medical device companies.

The Earnings Trends report, published last week, shows that the companies from the Medical sector are set to deliver 3.5% earnings growth on the back of 5.7% growth in sales year over year. New drugs and label expansions of blockbuster drugs are expected to have driven the top line of most of the big shots backed by higher demand, combating generic plus biosimilar competition for older medicines.

Moreover, drug stocks benefited from a plethora of mergers and acquisitions (M&A), which pumped billions of dollars in the pharma/drug industry in 2019. The year saw 14 billion-dollar deals, the largest being Bristol-Myers Squibb’s acquisition of Celgene in January for $74 billion. A pending takeover in the spotlight is that of AbbVie’s by Allergan. Last month, Novartis reached an agreement to buy The Medicines Company for $9.7 billion. In October, Alexion Pharmaceuticals offered $930 million to acquire Achillion Pharmaceuticals.

The Zacks Drugs industry has rallied 5.1% in the past six months and currently carries a Zacks Sector Rank in the top 44% (113 out of 256 industries). Several companies from this industry appear to be attractive bets ahead of earnings.

Zeroing in on Winners

Here we have highlighted five big drug/biotech companies, which are expected to deliver positive earnings surprise in their upcoming quarterly earnings announcements.

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

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