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Will Amgen (AMGN) Disappoint in the Q3 Earnings Season?

Amgen Inc. (AMGN) is set to report third-quarter 2014 results on Oct 27 after the market closes. Last quarter, the company had posted a positive earnings surprise of 19.10%. The company recorded positive earnings surprises in the last four successive quarters with the four-quarter trailing average beat being 11.11%. Let's see how things are shaping up for this announcement.

Factors at Play

We expect products like Enbrel, Kyprolis, Prolia and Xgeva to perform well in the third quarter thereby driving the top line.

However, sales of Aranesp are expected to remain under pressure due to lower demand. We note that on Jun 26, 2014, nine packaged lots of Aranesp were recalled from non-U.S. countries due to the presence of visible particulates. Competition and price cuts in Europe are also expected to hamper Aranesp revenues.

The company’s continuous investment in its late-stage pipeline will drive up research and development costs. This will have a negative impact on the company’s bottom line.

Earnings Whispers?

Our proven model does not conclusively show that Amgen is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Amgen’s Most Accurate estimate as well as the Zacks Consensus Estimate stands at $2.06. Hence, the company’s ESP stands at 0.00%.

Zacks Rank: Amgen’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements –- a positive Zacks Earnings ESP and a Zacks Rank #1, 2 or 3 –- to post an earnings beat this quarter.

Teva Pharmaceutical Industries Limited (TEVA) has an earnings ESP of +5.79% and carries a Zacks Rank #2 (Buy). It is scheduled to report third-quarter results on Oct 30.

The earnings ESP for Ligand Pharmaceuticals Inc. (LGND) is +30.00% and it carries a Zacks Rank #2. The company is scheduled to release third-quarter results on Oct 27.

Vertex Pharmaceuticals Incorporated (VRTX) has an earnings ESP of +28.07% and carries a Zacks Rank #3. It is scheduled to report third-quarter results on Oct 28.

Read the Full Research Report on VRTX
Read the Full Research Report on AMGN
Read the Full Research Report on TEVA
Read the Full Research Report on LGND


Zacks Investment Research