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Key Predictions for Q3 Earnings Reports of ABBV, MRK

Zacks Equity Research
Updated

The third-quarter reporting cycle is witnessing revenue acceleration and a positive revisions trend for Q4.

Results from about one-third (164 companies) of the S&P 500 members are already out. The revenue beat ratio for these companies is 68.3%, slightly below the preceding quarter (68.9%), which itself was unusually high comparing historically.

Total earnings for the 164 S&P 500 members that have reported already are up 7% from the same period last year on 4.8% higher revenues, with 72% beating EPS estimates.

According to the latest Earnings Preview report, these 164 S&P 500 companies account for 38.2% of the index’s total market capitalization. Per the report, total earnings of S&P 500 companies in Q3 are expected to grow 3.6% year over year on 5% higher revenues.

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Among the biotech/pharma bigwigs, Eli Lilly and Company LLY, Biogen Inc. BIIB and Amgen Inc. AMGN have reported their third-quarter results this week.

All the three companies beat expectations for both earnings and sales Lilly also raised its earnings and sales outlook for 2017. While Amgen slightly raised the lower end of the previously issued sales outlook, it raised the earnings guidance on the back of effective cost management.

However, shares of Biogen and Amgen declined following their results announcements. Concerns regarding Biogen’s multiple sclerosis franchise sales as well as U.S. sales of its recently launched spinal muscular atrophy (“SMA”) treatment, Spinraza, hurt investor sentiment. While for Amgen, the year over year decline in sales led to the share price fall.

Here we have large pharma companies that are set to report third-quarter results on Oct 27. Let's see how things are shaping up for this quarter.

AbbVie Inc. ABBV

AbbVie, which is scheduled to release earnings before the market opens, had delivered a positive earnings surprise of 1.43% last quarter. Lilly’s earnings performance has been mixed with earnings breaking even in two of the last four quarters while beating the same in the other two, bringing the average surprise to 0.76%.

For this quarter, Abbvie has an Earnings ESP of almost 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate is pegged at $1.39 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The company’s key drug, Humira, is likely to remain the main growth driver in Q3, backed by higher demand. This quarter, AbbVie expects Humira sales to rise in the high-teens range while internationally, the same are estimated to increase in a mid-single-digit range on an operational basis. Other drugs like Duopa and Creon are also expected to continue to perform well in the soon-to-be-reported quarter.( (Read More: Can AbbVie Spring a Surprise this Earnings Season?)

 

AbbVie Inc. Price and Consensus

 

AbbVie Inc. Price and Consensus | AbbVie Inc. Quote

Merck & Co., Inc. MRK

Merck which is scheduled to release earnings before the market opens. Merckhad delivered a positive earnings surprise of 16.09% last quarter. The company’s earnings performance has been pretty impressive so far, having delivered a positive surprise in each of the last four quarters. The average earnings beat over the last four quarters is 8.11%.

The company also has an Earnings ESP of almost 0.00%and a Zacks Rank #3,. The Zacks Consensus Estimate is pegged at $1.03 per share. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Merck’s new products like Keytruda (cancer), Zepatier (HCV) and Bridion (sugammadex) Injection are likely to drive the top line this quarter. Keytruda sales in the United States are gaining particularly on the back of strong momentum in the new indication of first-line lung cancer. (Read More: Will Merck Keep the Earnings Streak Alive in Q3?)

Our previous article showed that Merck was likely to beat on earnings this quarter. However, estimates changed thereafter and we are not certain of a beat this earnings season.

 

Merck & Company, Inc. Price and Consensus

 

Merck & Company, Inc. Price and Consensus | Merck & Company, Inc. Quote

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Eli Lilly and Company (LLY) : Free Stock Analysis Report
 
Merck & Company, Inc. (MRK) : Free Stock Analysis Report
 
AbbVie Inc. (ABBV) : Free Stock Analysis Report
 
Amgen Inc. (AMGN) : Free Stock Analysis Report
 
Biogen Inc. (BIIB) : Free Stock Analysis Report
 
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