5 Drug Stocks Poised To Beat Earnings Estimates In Q4

A positive earnings picture continues to emerge from the fourth-quarter earnings season with both earnings and revenue growth improving compared to recent quarters. As of Feb 8, 319 S&P 500 members or 76.3% of the index’s total market capitalization had reported results -- the numbers show that earnings are up 5.8% on revenue growth of 4.5% with 69.6% beating earnings estimates and 54.5% topping revenue expectations.

Standout sectors so far this quarter include Finance, Aerospace, Construction, Basic Materials, Consumer Staples, Business Services and Medical. While Q3 was a turnaround quarter for the S&P 500 index after five quarters of back-to-back declines, current expectations for Q4 show earnings growth of 7.3% on revenue growth of 3.9%.

What’s in Store for the Rest of the Quarter

12 of the 16 Zacks sectors are expected to record positive earnings growth this quarter with Finance leading the group on the back of expected earnings growth of 20.7%, followed by Aerospace (13.6%). Meanwhile, with several pharma and biotech stocks yet to report earnings and the Medical sector expected to record earnings growth of 5.3% on revenue growth of 5.7% in Q4, it makes sense to select stocks from this sector that are expected to do well in Q4. Investing in such stocks could prove beneficial for investors as an earnings beat usually leads to significant share price appreciation. Medical is one of the few sectors that has consistently recorded earnings growth over the last 4 quarters.

5 Drug Stocks Set to Be Winners in the Q4 Earnings Season

With the help of the Zacks Stock Screener, we have zeroed-in on five drug stocks that sport a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) and have an Earnings ESP of at least 5%. Earnings ESP is a very valuable tool for investors looking for stocks that are most likely to beat earnings estimates. Moreover, adding a Zacks Rank of #1, 2 or 3 has produced a positive surprise 70% of the time. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Exelixis, Inc. (EXEL - Free Report) : South San Francisco, CA-based Exelixis is focused on the discovery, development and promotion of new medicines for cancer. Approved products include Cabometyx (advanced kidney cancer), Cometriq (certain forms of thyroid cancer) and Cotellic (advanced melanoma). Exelixis’ earnings track record is good having surpassed expectations in three of the last four quarters.

The Zacks Rank #2 stock is expected to post a positive earnings surprise of 200% when it reports fourth quarter results on Feb 27. Cabometyx is experiencing rapid and broad uptake in the market with label expansion opportunities leaving room for upside. The company has quite a few pipeline catalysts lined up for the coming quarters. A look at Exelixis’ price performance over the last one year shows that the company has significantly outperformed the Zacks-categorized 


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Incyte Corporation (INCY - Free Report) : Wilmington, DE-based Incyte is focused on the discovery, development and commercialization of proprietary therapeutics. The Zacks Rank #3 stock is expected to deliver a positive earnings surprise of 85.7% when it reports 4Q results on Feb 14. The company’s flagship product, Jakafi, a JAK1/JAK2 inhibitor, looks well-positioned for growth. Moreover, with Gilead presenting mixed results on its experimental JAK inhibitor, momelotinib, the competitive threat for Jakafi seems to have gone down considerably. Incyte has a robust pipeline as well with a focus on the highly sought after immuno-oncology space.

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Jazz Pharmaceuticals plc (JAZZ - Free Report) : Dublin, Ireland-based Jazz has a strong presence in the sleep disorder market as well as in the hematology/oncology segment. The Zacks Rank #3 stock is expected to report results on Feb 28 and has an earnings ESP of 36.9%. At the J.P. Morgan Healthcare Conference earlier this year, Jazz said that its key drug, Xyrem (treatment of cataplexy and EDS in patients with narcolepsy) is on track to achieve the 2016 sales guidance of $1,100 – $1,125 million.

Over the past one year, the company has outperformed the Zacks categorized Medical-Drugs industry with the company’s shares gaining 9% compared to the industry gain of 2.2%.

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Ironwood Pharmaceuticals, Inc. (IRWD - Free Report) :Cambridge, MA-based Ironwood is scheduled to report fourth quarter results on Feb 21. The Zacks Rank #3 stock, which surpassed earnings expectations in three of the last four quarters, is expected to deliver a positive earnings surprise of 30.4% in the fourth quarter. Marketed products include Linzess (irritable bowel syndrome with constipation or chronic idiopathic constipation) and Zurampic (treatment of hyperuricemia associated with uncontrolled gout). The company’s focus areas include gastrointestinal diseases and vascular and fibrotic diseases.

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Achaogen, Inc. (AKAO - Free Report) : South San Francisco, CA-based Achaogen is a late-stage company developing antibacterial medicines. The Zacks Rank #3 stock, which is expected to report 4Q results on Mar 21, could deliver a positive earnings surprise of 27.7%. In Dec 2016, the company had announced positive late-stage data on its lead pipeline candidate, plazomicin, complicated urinary tract infections (cUTI). Achaogen plans to file for FDA approval in the second half of the year.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or ...

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