2 Large Cap Drug Stocks To Watch For Earnings: ABBV & MRK

Q2 earnings season has picked up pace with 208 S&P 500 members, accounting for 50.5% of the index’s total market capitalization, having reported results.

While total earnings for these 208 index members are down 4.7% from the year-ago quarter, revenues are up 0.4% year-over year, with 73.1% beating earnings estimates and 51.9% surpassing top-line expectations.

However, with growth remaining problematic, Q2 is on track to be the 5th quarter in a row of earnings declines for the S&P 500 index.

How have Drug Stocks Fared So Far?

Quite a few major pharma and biotech companies have reported results so far with performance being mixed. While it was a "beat and raise" quarter for companies like Johnson & Johnson (NYSE:JNJ) , Amgen Inc. (NASDAQ:AMGN) and Biogen, Inc. (NASDAQ:BIIB) , Gilead Sciences, Inc. (NASDAQ:GILD) , a big name in the biotech sector, lowered its product sales outlook.

Meanwhile, a look at our Earnings Trend report (as of Jul 27, 2016) shows that 36.5% of Medical companies (within the S&P 500 index) have reported results with earnings declining 0.3% from the year-ago period while revenues are up 12.6%. The Medical sector is expected to be among the better-performing sectors in Q2 with earnings expected to grow 2.3% on revenue growth of 7.7%.

On Jul 29, two major large cap drug stocks will be reporting second quarter results. Let’s see how these companies are placed ahead of the scheduled announcements.

North Chicago, IL-based AbbVie Inc. (NYSE:ABBV) , which will be reporting results before the market opens tomorrow, has a pretty good track record with the company surpassing earnings expectations in three of the last four quarters and reporting in-line results in the remaining quarter. On its first quarter call, AbbVie had guided towards second quarter earnings per share of $1.19 - $1.21. AbbVie’s flagship drug, Humira, should drive growth along with cancer treatment, Imbruvica. However, hepatitis C virus (HCV) treatment, Viekira, will continue to be impacted by the addition of liver injury warnings to the labels of AbbVie’s HCV treatments as well as the presence of new competition in the market.

AbbVie currently has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%, which makes surprise prediction difficult (Read more: AbbVie Q2 Earnings: Will the Stock Pull a Surprise?).

Large-cap pharma stock, Merck & Co. Inc. (NYSE:MRK) will also be reporting second quarter results tomorrow before the market opens. The Kenilworth, NJ-based company’s performance has been pretty impressive with the company beating earnings expectations consistently. However, will the company beat estimates again this quarter?

Merck’s Earnings ESP, which was previously 0.00% and is now a negative 1.09%, when combined with Zacks Rank #3 makes surprise prediction difficult. Genericization as well as the impact of the Venezuelan financial crisis will continue to be headwinds for Merck this quarter while contribution from new products like Keytruda should increase (Read more: Merck Q2 Earnings: Will the Stock Pull a Surprise?).

Stay tuned and check later on our full write-up on earnings releases of these stocks!

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