Medical Stocks Reporting Early Next Week: GILD, LLY & More

Q2 earnings season is gaining momentum with 103 (as of Jul 21) of the S&P 500 members having already reported results. With 56.3% of these members beating top-line estimates and 68.9% surpassing bottom-line expectations, do we have a better earnings picture?

Admittedly, there are some signs of improvement in the aggregate earnings picture that are expected to lift hopes for the second half and thereafter. The quarterly results of some big names across sectors were not only better than expected, but also showed signs of real momentum. That said, earnings are headed south for the fifth quarter in a row. As the rest report Q2 results over the coming weeks, visibility should improve.

Notably, the Medical sector, which was among the best performing sectors in Q1, is again touted to feature on the best performers’ list. The Medical sector is expected to be one of the seven sectors to record earnings growth in Q2. Earnings in the Medical sector are expected to grow 1.7% on revenue growth of 7.7%, per our Earnings Trends article.

This fact cannot be refuted. Healthcare bellwether Johnson & Johnson (NYSE:JNJ) kick started the season by posting a beat on both earnings and revenues. Moreover, the company has raised its earnings outlook for the year yet again. Among biotechs, Biogen Inc. (NASDAQ:BIIB) is the only major company to have released Q2 results. Biogen like Johnson & Johnson not only managed to beat earnings estimates by a wide margin, but also upped its guidance for the year.

Meanwhile, Novartis AG (NYSE:NVS) and Abbott Laboratories (NYSE:ABT) also posted encouraging results, beating on both fronts.

A number of pharma and biotech companies are yet to report Q2 results. Let’s see what awaits these four medical stocks when they report earnings results early next week.

What to Expect from these Medical Stocks?

Biotech company, Gilead Sciences Inc. (NASDAQ:GILD) known for its presence in the hepatitis C virus (HCV) market because of its blockbuster HCV drugs, Sovaldi and Harvoni, has a pretty good track record with beats in three of the last four quarters. This Zacks Rank #2 (Buy) stock, which has a positive Earnings ESP of 6.91%, looks set to beat estimates in Q2. Focus will be on the performance of the HCV and HIV franchises given that the company has gained quite a few promising approvals over the last few quarters with an eye also on deals/acquisitions. Moreover, Gilead’s share buyback program should boost the bottom line (read more: Gilead Stock Likely to Beat This Earnings Season).

Gilead is scheduled to report Q2 results on Jul 25, after the market closes.

Another healthcare company looking up this earnings season is Eli Lilly and Company (NYSE:LLY) . The combination of Lilly’s Zacks Rank #3 (Hold) and +1.18% ESP makes us reasonably confident of an earnings beat this season. Lilly is set to report Q2 results on Jul 26, before the market opens. Lilly has an impressive track record when it comes to earnings. The company’s earnings have surpassed expectations in three of the last four quarters.

Though existing products like Trajenta and Forteo as well as new products like Cyramza and Portrazza among others should boost top-line growth, there are challenges in the form of generic competition faced by drugs like Alimta and Cialis in certain territories as well as competition from immuno-oncology agents. Moreover, price revisions in Japan, effective Mar 1, will impact sales. Focus should be on the performance of recently launched moderate-to-severe plaque psoriasis treatment, Taltz, among other things (read more: Eli Lilly May Beat Q2 Earnings: Will the Stock Gain?).

Pharmacy benefit manager, Express Scripts Holding Company’s (NASDAQ:ESRX) Zacks Rank #3 increases the predictive power of the ESP. However, it has a 0.00% ESP, which makes it difficult to predict an earnings beat when it reports its Q2 results on Jul 25, after the market closes. Express Scripts’ track record has however been decent with the company having comfortably beaten expectations in three of the last four quarters.

For the second quarter, Express Scripts expects earnings in the range of $1.55–$1.59 per share while adjusted claims are anticipated to be 312 million to 322 million. The company should continue to benefit from increased generic utilization, a shift toward mail orders, strong specialty growth and an aging population. Focus will remain on the status of Express Scripts' contract with Anthem, Inc. (NYSE:ANTM) (read more: Express Scripts Q2 Earnings: Stock to Disappoint?).

Chemed Corporation (NYSE:CHE) purchases, operates and divests subsidiaries engaged in diverse business activities. Currently, the company operates through two wholly owned subsidiaries: VITAS Healthcare and Roto-Rooter. This Cincinnati, OH-based company has delivered encouraging performance in three of the last four quarters with an average beat of 2.70%. However, the company’s Zacks Rank #3 with an ESP of 0.00% makes a surprise prediction difficult this quarter.

Chemed is scheduled to release Q2 results on Jul 25, after the market closes.