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Is a Beat in the Cards for Perrigo (PRGO) in Q3 Earnings?

We expect Perrigo Company plc PRGO to beat expectations when it reports third-quarter 2017 results before the opening bell on Nov 9.

Perrigo has an average positive surprise of 13.13%. Last quarter, the company delivered a positive surprise of 28.42%.

Perrigo’s shares have lost 2.1% so far this year against the industry’s rally of 19.8%.

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

Factors Influencing This Quarter

Perrigo’s product acquisitions and new product launches in the Prescription Pharmaceuticals (Rx) segment are expected to boost sales in the coming quarters. In September, Perrigo announced that it has initiated shipments of the first-to-market over-the-counter store brand equivalent of Nexium capsules to retail customers which is indicated to treat frequent heartburn. During the same month, the company also announced FDA approvals for generic version of Exalgo for management of moderate to severe pain in opioid tolerant patients and the generic version of Acanya for topical treatment of acne vulgaris. These launches and approvals are expected to contribute to the top line in the coming quarters.

Also, the ongoing restructuring initiatives and operating expense discipline are expected to support the bottom line.

However, price erosion and changing market dynamics amid a tough drug pricing environment across Perrigo’s Rx segment is likely to continue hurting the segment’s performance. It anticipates price erosion of approximately 9-11% at the Rx segment in the coming quarters.

The Branded Consumer Healthcare (“BCH”) business, part of Consumer Health Care International (“CHCI”) segment, is still being impacted by unfavorable market dynamics in countries like Belgium, France, Germany and Italy. This BCH segment is projected to underperform in the yet-to-be-reported quarter due to lower-than-expected revenues from certain high-margin products.

Earnings Whispers

Our proven model shows that Perrigo is likely to beat on earnings because it has the right 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 +2.53%, indicating a likely positive earnings surprise. The figure also represents the difference between the Most Accurate estimate of $1.15 per share and the Zacks Consensus Estimate of $1.12. 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.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks That Warrant a Look

Some other health care stocks worth considering with the right combination of elements to surpass estimates this quarter are:

Agenus Inc. AGEN is scheduled to release results on Nov 7. The company has an Earnings ESP of +8.11% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Syndax Pharmaceuticals, Inc. SNDX is scheduled to release results on Nov 7. The company has an Earnings ESP of +2.90% and a Zacks Rank of 3.

ACADIA Pharmaceuticals Inc. ACAD is scheduled to release results on Nov 7. The Zacks #3 Ranked company has an Earnings ESP of +3.20%.

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Perrigo Company (PRGO): Free Stock Analysis Report
Agenus Inc. (AGEN): Free Stock Analysis Report
Syndax Pharmaceuticals, Inc. (SNDX): Free Stock Analysis Report
ACADIA Pharmaceuticals Inc. (ACAD): Free Stock Analysis Report
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