Is A Beat In The Cards For Perrigo (PRGO) In Q1 Earnings?

We expectPerrigo Company plc (NYSE:PRGO) to beat estimates when it reports first-quarter 2018 results before the opening bell on May 8.

Perrigo’s earnings history has been quite impressive with the company surpassing expectations in all the last four quarters with an average beat of 16.29%. Last reported quarter, the company delivered a positive surprise of 3.23%.

Shares of the company have lost 10.4% so far this year against the industry’s gain of 3.1%.

Let’s see, how things are shaping up at the company this reporting cycle.

Factors Influencing the Last Completed Quarter

Perrigo’s product acquisitions and launches in the Prescription Pharmaceuticals (Rx) segment are expected to boost sales in the to-be-reported quarter.

The company’s over-the-counter version of AstraZeneca’s (NYSE:AZN) heart burn drug Nexium was launched last September. The same generated significant sales in fourth-quarter 2017. We expect this positive trend to continue in first-quarter release as well.

Moreover, in January 2018, the company announced the FDA approvals and subsequent launch for Prolensa’s generic version to treat postoperative inflammation and reduction of ocular pain in patients having undergone cataract surgery. Additionally, during the same month, Perrigo received an FDA nod for the generic version of Epiduo to enable topical treatment of acne vulgaris in patients, aged nine years and above. These product introductions are likely to drive sales in the to-be-reported quarter.

Also, the ongoing restructuring initiatives and operating expense discipline are anticipated to cushion the company’s bottom line.

However, price erosion and changing market dynamics amid a tough drug pricing environment across Perrigo’s Rx segment might continue to hurt the segment’s performance.

Moreover, the Branded Consumer Healthcare (BCH) business, integral Consumer Health Care International segment, is still being adversely impacted by unfavorable market dynamics in countries like Belgium, France, Germany and Italy. This BCH segment’s sluggish performance is apprehended to persist in the yet-to-be-reported quarter on lower-than-expected revenues from certain high-margin products.

Earnings Whispers

Our proven model shows that Perrigo is likely to beat on earnings this earnings season because it has the perfect combination of the two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Zacks ESP: Perrigo has an Earnings ESP of +0.11%, which indicates a likely earnings surprise. The Zacks Consensus Estimate is pegged at $1.14 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Perrigo has a Zacks Rank #3, which increases the predictive power of ESP. Further, combined with a positive ESP, the stock has a significantly higher chance of beating estimates.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are a couple of other health care stocks also worth considering with the right combination of elements to surpass estimates this time around:

Emergent Biosolutions Inc. (NYSE:EBS) has an Earnings ESP of +61.80% and is a Zacks #3 Ranked player. The company is scheduled to release first-quarter results on May 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Adverum Biotechnologies, Inc. (NASDAQ:ADVM) has an Earnings ESP of +6.90% and a Zacks Rank of 3. The company is expected to release first-quarter results on May 8.

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