Regeneron (REGN) Q1 Earnings: Stock Likely To Disappoint

Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) is scheduled to release first-quarter 2016 results on May 5, before the opening bell. Last quarter, the company recorded a negative earnings surprise of 45.93%.

Will Regeneron disappoint earnings estimates this time around as well? Let’s see how things are shaping up for this announcement.

Factors at Play

Eye drug, Eylea, should continue to remain the main growth driver of the company. Label expansions and market share gains both in the U.S. and globally should help the product to continue contributing significantly to the top line. However, the company expects seasonality and weather to have an impact on the drug’s performance in the first quarter of 2016. In the fourth quarter of 2015, U.S. sales of the drug showed a sequential improvement of 1.6%.

For 2016, the company expects U.S. Eylea net sales to grow approximately 20% year over year.

We note that Regeneron has a global development and commercialization agreement with the HealthCare unit of Bayer AG (OTC:BAYRY) outside the U.S. for Eylea.

Apart from Eylea, investor focus will remain primarily on the performance of the PCSK9 inhibitor, Praluent. We note that Regeneron has co-developed Praluent with Sanofi (NYSE:SNY) . The current payer restrictions are limiting the product’s uptake though the companies expect a gradual uptick in sales. With reimbursement discussions underway across Europe, focus will be on formulary and reimbursement decisions.

Surprise History

Regeneron’s performance has been far from impressive with the company missing earnings estimates in three of the trailing four quarters. Overall, the company has delivered an average negative earnings surprise of 9.27%.

What Our Model Indicates

Our proven model does not conclusively show that Regeneron is likely to beat earnings this quarter. That 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 estimates. However, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -18.98%. This is because the Most Accurate estimate currently stands at $1.11, while the Zacks Consensus Estimate stands higher at $1.37.

Zacks Rank: Regeneron currently has a Zacks Rank #4 (Sell). As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock That Warrants a Look

Here is a health care stock that you may want to consider instead, as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Genocea Biosciences, Inc. (NASDAQ:GNCA) has an Earnings ESP of +2.50% and a Zacks Rank #3. The company is scheduled to release first-quarter results on May 5.