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Roundtable: 3 Stocks Preparing to Shock the Market

Earnings season is upon us, so we decided to ask our top health care contributors to identify the stock they're watching to surprise on earnings. Here are the companies they singled out.

George BudwellNext week, I expect Cubist Pharmaceuticals (NASDAQ: CBST.DL  ) to surprise to the upside.

Cubist is set to report second-quarter earnings on July 22 after the bell. The Street is expecting earnings per share of $0.02 on $299.6 million in revenue for the quarter. Consensus has nonetheless fallen dramatically over the course of the quarter for two reasons.

Firstly, Cubist is gearing up to launch Sivextro, indicated for acute bacterial skin and skin structure infections, thus increasing operational costs. More importantly, the Street lost faith in Cubicin's growth story after the drug posted weak sales numbers in the first-quarter of 2014.

And that's where I think the Street will get caught flat-footed this quarter. Cubist's management decided to maintain its full year guidance of $1.19 to $1.275 billion following its first-quarter hiccup, whereas many analysts lowered their projections to around a billion.

What's important to understand is that Cubicin's growth is supposed to be uneven due to seasonality in the marketplace. Put simply, I think revenues will come in closer to $310 million for the second quarter based on a seasonal upswing in Cubicin sales.

Todd CampbellDespite shares hitting new highs, I like Molina Healthcare (NYSE: MOH  ) heading into earnings.

Although just 26 states (plus DC) are embracing Medicaid expansion, the Centers for Medicare and Medicaid report that six million people have signed up for Medicaid coverage following the ACA's launch last fall. That brought total Medicaid enrollment to 65 million people at the end of April, up 10% from last October.

Surging enrollment is good news for insurers administering state programs, but it's particularly good news for specialty insurers like Molina given that the vast majority of Molina's revenue is tied to Medicaid. Molina's sales jumped 21% in the first quarter thanks in part to 47,000 new Medicaid members in California.

A big backlog of Medicaid applicants in California (several hundred thousand applications still need to be processed as of last week) continues to provide a tailwind, but Michigan should help Molina's quarter too. Molina served 218,000 Medicaid members in Michigan exiting Q1, but that number should jump given that Michigan reported signing up 323,000 new Medicaid members over the past 14 weeks. 

Brian Orelli: Sales for Gilead Sciences' (NASDAQ: GILD  ) Sovaldi aren't likely to be much of a surprise. We already know they're going to be huge.

First quarter sales were nearly $2.3 billion, and prescription data for the hepatitis C drug suggests that sales should be higher in the second quarter since prescriptions continued to climb until the beginning of May before flattening out. It's hard to know exactly how much higher because discounts aren't known and prescription data isn't 100% accurate, but a $3-billion quarter isn't out of the question according to ISI analyst Mark Schoenebaum.

The surprise could come in what Gilead says about the potential for sales in the current quarter. With an all-oral combination of Sovaldi and Gilead's ledipasvir potentially being approved in October, doctors may warehouse patients, waiting for the easier-to-take cocktail.

While warehousing would delay payment, it would ultimately be good news for Gilead because many of the patients are currently being treated with a combination of Sovaldi and Johnson & Johnson's Olysio. If patients delay treatment, Gilead can capture the full sales value for those patients, assuming Sovaldi-ledipasvir costs more than Sovaldi alone.

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