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What to Expect from Exelixis (EXEL) This Earnings Season? - Analyst Blog

Zacks Equity Research
Updated

Exelixis, Inc. EXEL is expected to report its second-quarter 2015 results on Jul 30.

The company has an impressive track record, having beat estimates comfortably in the last four quarters. It posted a positive average earnings surprise of 11.61% in the last four quarters. Let us see how things are shaping up for this announcement.

Factors Influencing This Quarter

Given that Cometriq is the only approved product in Exelixis’ portfolio, it will remain the sole growth engine at the company.

The company is conducting a phase III pivotal study (METEOR) on Cometriq in comparison with Afinitor for the treatment of metastatic renal cell carcinoma in patients whose disease progressed following treatment with a VEGF-receptor tyrosine kinase inhibitor. The company intends to seek a partner for Cometriq in ex-U.S. markets on the basis of the outcome of METEOR. Exelixis revealed positive top-line data from METEOR in Jul 2015 and we expect investor focus to remain on further updates from the company.

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Meanwhile, Exelixis’ has an important regulatory event next month. Cobimetinib (in combination with Zelboraf) is under review in the U.S. and the EU for treatment-naïve patients suffering from unresectable, locally advanced melanoma harboring a BRAF V600 mutation. A response from the FDA is due on Aug 11. The company may discuss its plans for the potential launch of the product, if approved. Cobimetinib is being evaluated under priority review status in the U.S.

Although the company is expected to benefit from cost saving measures implemented in the third quarter of 2014, it could face an increase in marketing expenses related to potential launch of cobimetinib.

What Our Model Indicates

Our proven model does not conclusively show that Exelixis 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. 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 -9.52%. This is because the Most Accurate estimate is a loss of 23 cents, while the Zacks Consensus Estimate is a loss of 21 cents.

Zacks Rank: Although Exelixis has a Zacks Rank #2, when combined with its negative ESP, it makes surprise prediction difficult.

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

Stocks That Warrant a Look

Here are other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Perrigo Company PRGO has an Earnings ESP of +1.00% and carries a Zacks Rank #3. The company is slated to release second-quarter results on Aug 5.

The Earnings ESP for Teva Pharmaceutical Industries Limited TEVA is +0.77% and it carries a Zacks Rank #3. The company is scheduled to release second-quarter results on Jul 30.

Mallinckrodt MNK has an Earnings ESP of +0.55% and carries a Zacks Rank #3. The company is scheduled to release third quarter fiscal 2015 results on Aug 4.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
TEVA PHARM ADR (TEVA): Free Stock Analysis Report
 
EXELIXIS INC (EXEL): Free Stock Analysis Report
 
PERRIGO CO PLC (PRGO): Free Stock Analysis Report
 
MALLINCKRODT PL (MNK): Free Stock Analysis Report
 
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Zacks Investment Research