Exelixis (EXEL) Q1 Earnings: Will The Stock Disappoint?

Exelixis, Inc. (NASDAQ:EXEL) is scheduled to report first-quarter 2017 results on May 1, after the market close.

The company surpassed expectations thrice in the four trailing quarters and missed the same once, with an average positive earnings surprise of 360.11%.

Exelixis’ share price has increased 42.8% year to date compared with the Zacks classified Medical - Biomedical and Genetics industry’s gain of 1.8%.

Factors Likely to Impact Results

Cabometyx tablets (launched in Apr 2016) are experiencing rapid and broad uptake in the market with label expansion opportunities leaving room for an upside. The drug was approved in Apr 2016 for the treatment of patients with advanced renal cell carcinoma.

Exelixis' leading drug Cometriq, the capsule form of cabozantinib, is approved for the treatment of progressive metastatic medullary thyroid cancer (MTC). Moreover, based on positive results from the phase II CABOSUN study on cabozantinib in Oct 2016, the company plans to submit a supplemental New Drug Application (sNDA) for treating first-line advanced RCC. The company also plans to build cabozantinib into an entire oncology franchise.

The company expects Cometriq revenues to gradually decline over time as RCC patients come off Cometriq therapy and new patients initiate therapy with Cabometyx. However, successful commercialization of the other marketed drug, Cotellic is expected to boost the top line in the U.S. Cotellic is approved in the U.S. and EU to be used in combination with Roche Holding’s Zelboraf in the U.S. for the treatment for patients with BRAF V600E or V600K mutation-positive advanced melanoma.

Exelixis has collaborations with other leading pharmaceutical and biotechnology companies such as Bristol-Myers Squibb (NYSE:BMY) , Sanofi (PA:SASY) Merck (NYSE:MRK) and Daiichi Sankyo for various compounds and programs in its portfolio. These collaborations allow Exelixis to earn milestone payments and royalties that boost its top line.

Earnings Whispers

Our proven model does not conclusively show that Exelixis is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat earnings. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -200.00% since the Most Accurate stands at a loss of 3 cents while the Zacks Consensus Estimate is pegged at a loss of 1 cent. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Exelixis carries a Zacks Rank #3. This when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and #5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Gilead Sciences, Inc. (NASDAQ:GILD) is scheduled to report its results on May 2. It has an Earnings ESP of +2.77% and carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Paratek Pharmaceuticals, Inc. is +0.83% and it carries a Zacks Rank #3 (Hold). The company is scheduled to release results on May 1.

Proteostasis Therapeutics (NASDAQ:PTI) has an Earnings ESP of +5.71% and carries a Zacks Rank #2 (Buy). It is scheduled to report its results on May 12.

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