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3 Biotech Stocks With Rising Earnings Estimates Post Q4

Zacks

The Q4 earnings season for the pharma/biotech sector was scattered with a few small biotech companies yet to report. The releases so far provide us with a clear picture of the sector’s performance.

Overall, the sector performed reasonably well. Among the biotech/pharma bigwigs, Gilead GILD, Celgene CELG and Vertex VRTX beat earnings and revenue estimates. Meanwhile, Biogen BIIB announced mixed results with earnings beating estimates and sales lagging the same. However, Amgen AMGN had a rather weak quarter as it missed expectations for earnings and sales and also issued a lower-than-expected sales guidance for 2018.

Drug/biotech stocks remained on a growth trajectory in 2017. Ramp up in new product sales, successful innovation and product line expansion, favorable clinical study results, frequent FDA approvals, strong performance by key products, growing demand for drugs especially for rare-to-treat diseases, an aging population and increased health care spending are some of the factors that should keep driving the sector. A faster drug approval process, the proposed removal of outdated regulations that push up costs and a slowdown in innovation should also prove beneficial.

The year started off on expectations of a pick-up in M&A activity. The new tax law, which cuts corporate tax rate from 35% to 21% and encourages companies to bring back huge cash held overseas at a one-time tax rate of 10%, is expected to spur merger activity this year.


Sanofi SNY, earlier this year, announced deals to buy Belgian biotech company, Ablynx, and haemophilia-focused biotech firm — Bioverativ.

Banking on the positive trend and impressive Q4 performance, it might be the perfect time to cash in on the bountiful prospects in this growing market. Here we have picked three biotech stocks which saw positive estimate revisions post Q4 earnings release and also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings estimate revisions have the greatest impact on stock prices. Stocks with rising estimates have significantly outperformed the S&P 500 index year after year. Hence, investors can safely bet on stocks that have been seeing an upward movement in earnings estimates. All the three companies have also seen a steady rally in the share price post Q4 results.

Ligand Pharmaceuticals Incorporated LGND

The San Diego, CA-based biotechnology company, Ligand, carries a Zacks Rank #2. The stock witnessed positive estimate revision over the last 30 days. The company released fourth-quarter earnings on Feb 21. It has seen the Zacks Consensus Estimate for 2018 earnings rise 9.8% for 2018 and 21.1% for 2019. The company surpassed earnings and revenue estimates in fourth-quarter 2017 mainly on higher royalty revenues. Additionally, shares of the company have rallied 16.8% post its Q4 earnings release.

Regeneron Pharmaceuticals, Inc. REGN

The Tarrytown, NY-based biopharmaceutical company, Regeneron, witnessed positive estimate revision over the last 60 days. The company released fourth-quarter earnings on Feb 8. The Zacks Rank #1 stock has seen the Zacks Consensus Estimate for earnings rise 9.7% and 6.4% for 2018 and 2019, respectively. Regeneron’s fourth-quarter results were impressive as both earnings and sales beat estimates on strong sales of the company’s key marketed drug, Eylea. Shares of the company have rallied 7.1% after it released Q4 earnings release.

Horizon Pharma plc HZNP

Based in Dublin, Ireland, Horizon Pharma carries a Zacks Rank #2. The company has seen the Zacks Consensus Estimate for earnings move 10% up in the last 30 days for 2018 and 14.9% for 2019. The company released fourth-quarter earnings on Feb 26. Shares of the company have gained 5% post Q4 earnings announcement. Horizon Pharma also beat earnings and sales estimates in fourth-quarter 2017 backed by strong performance by its Orphan unit. The company’s sales guidance for 2018 is encouraging as well.

Outlook

While 2017 was strong, this year is expected to be a vital one for the biotech sector as these companies continue to invest in pipeline, build global business and drive new product growth.

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