Is A Beat In The Cards For Mallinckrodt (MNK) In Q3 Earnings?

Mallinckrodt plc (NYSE:MNK) is scheduled to report third-quarter 2019 results on Nov 5, before market open.

Mallinckrodt has surpassed expectations in the last four quarters, the average positive earnings surprise being 15.56%. Let’s see how things are shaping up for this announcement.

Why a Likely Earnings Beat

Our proven model predicts an earnings beat for Mallinckrodt this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Mallinckrodt has an Earnings ESP of +0.36% as the Zacks Consensus Estimate is pegged at $1.98 and the Most Accurate Estimate stands at $1.99.

Zacks Rank: The company has a Zacks Rank #3.

Factors Impacting Q3

The company operates in two reportable segments — the Specialty Brands and the Specialty Generics.

Specialty Brands produces and markets branded pharmaceutical products like Acthar, Inomax and Ofirmev, among others.

Sales of Acthar, Mallinckrodt’s largest product, were down in the second quarter primarily due to continued reimbursement challenges affecting new and returning patients, and constant payer scrutiny on overall specialty pharmaceutical spending. This trend most likely continued in the third quarter as well.

Inomax, the company’s second-largest product, put up a strong performance in the second quarter, driven by continued demand and contract renewals, and the same has most likely prevailed in the third quarter. Also, Ofirmev and Therakos might have boosted performance in the third quarter owing to strong demand.

Apart from the regular top and bottom-line numbers, we expect investors to focus on the company’s two late-phase programs on terlipressin and StrataGraft. In September, the company announced positive top-line results from the pivotal phase III study of its investigational StrataGraft regenerative tissue. The study, which met both primary endpoints, evaluated the efficacy and safety of a single application of StrataGraft for the treatment of deep partial-thickness thermal burns.

Update on Specialty Generics Separation

Last December, the company announced its plan to spin-off the Specialty Generics business into a new entity. However, based on market conditions and developments, including increasing uncertainties regarding the opioid litigation, the company shelved this plan. Mallinckrodt continues to evaluate a range of options for the separation of the Specialty Generics business and we expect it to throw more light on this.

Share Price Performance

Mallinckrodt’s stock has plunged 80.3% in the year so far compared with the industry’s decline of 2.5%.

Other Stocks to Consider

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

Allergan plc (NYSE:AGN) has an Earnings ESP of +2.51% and a Zacks Rank of 2. The company is scheduled to release third-quarter results on Nov 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jazz Pharmaceuticals, Inc. (NASDAQ:JAZZ) has an Earnings ESP of +1.70% and a Zacks Rank #2. The company is scheduled to release third-quarter 2019 results on Nov 5.

Regeneron (NASDAQ:REGN) has an Earnings ESP of +4.41% and a Zacks Rank #3. The company is scheduled to release third-quarter 2019 results on Nov 5.

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