Will Amgen (AMGN) Sustain Its Earnings Beat Trend In Q3?

We expect biotech major Amgen Inc. (NASDAQ:AMGN) to beat expectations when it reports third-quarter earnings results on Oct 27 after market close. Amgen had delivered a positive earnings surprise of 3.65% in the second quarter.

Amgen’s performance has been pretty impressive, with consistent positive surprises. The average earnings beat over the last four quarters is 11.55%.

Let’s see how things are shaping up for the company this quarter

Factors at Play

Amgen’s growth products like Enbrel, Xgeva, Vectibix, Sensipar, Prolia and Nplate should continue to perform well. While new patient adoption and repeat injections should drive Prolia, Xgeva should benefit from its superior clinical profile versus competition.

However, Enbrel is facing increasing competition in the dermatology segment which could hurt sales.

Moreover, Kyprolis sales fell below expectations in the second quarter due to increased competition in the multiple myeloma market. It remains to be seen if sales pick up in the third quarter.

Meanwhile, Epogen will continue to be impacted by further share decline at Fresenius Medical Care and the potential for additional switching to Aranesp.

The bottom line will continue to be driven by the company’s overall cost-cutting efforts and share buyback. The company’s restructuring plan should make it leaner and more cost efficient.

Investor focus will remain on the performance of the company’s PCSK9 inhibitor, Repatha, its acceptance in the physician community, the formulary scenario for the product and its performance in other territories where it is being launched. We expect Repatha sales to pick up once positive outcomes data is available and added to the label. The impact of the launch of Zarxio (biosimilar) on Neupogen sales will also be in focus.

What Our Model Indicates

Our proven model shows that Amgen is likely to beat on earnings because it has the right combination of the two key ingredients.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.79%. This is a meaningful indicator of a likely positive earnings surprise.

Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Amgen’s Zacks Rank #3 and +1.79% ESP makes us confident in looking for an earnings beat in the upcoming release.

Other Stocks to Consider

Some other stocks in the healthcare sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

AbbVie Inc. (NYSE:ABBV) is scheduled to report results on Oct 28. The company has an Earnings ESP of +0.83% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) has an Earnings ESP of +12.5% and a Zacks Rank #2. It is expected to report its results on Nov 3.

Novartis AG (NYSE:NVS) has an Earnings ESP of +2.54% and a Zacks Rank #3. The company is scheduled to release results on Oct 25.

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