Rising industry trends, new products, competitor pricing, and any number of other things can cause share prices to pop or drop during earnings season. That makes this time of year particularly perilous, so we asked three of our top analysts to crunch the numbers and tell us which companies they believe will deliver this earning's season's biggest surprises. Read on to learn what they think.
Todd Campbell: Picking companies that may surprise is a bit of a guessing game, but I think that Biogen (BIIB 2.03%) has a very good shot at outpacing analysts revenue and profit outlook.
Despite Biogen's Tecfidera being the third oral therapy approved by the FDA to reduce MS relapses, Tecfidera's sales have been red hot since the drug launched in 2013. Tecfidera has already become the market share leader among oral treatments in the United States and it could be on its way to similar success in Europe, too. In February, Biogen announced that the EU's chief regulator gave Tecfidera the go-ahead, clearing the way for Biogen to begin negotiating prices with individual countries. As those deals are finalized, it wouldn't be shocking to see Tecfidera cut more deeply into the market share held by Novartis' Gilenya and Sanofi's Aubagio overseas.
But Tecfidera isn't the only drug that could help Biogen deliver an upside surprise this season. Biogen's hepatitis B drugs Eloctate and Alprolix won FDA approval earlier this year and the FDA approved Plegridy, a new long lasting interferon treatment for MS relapses, in August. Those drugs could start contributing meaningfully to sales soon. Since the company has outpaced analyst earnings forecasts in three of the past four quarters, it may not be stretch to think it could beat again this quarter, too.
Matthew Frankel: One stock that I definitely think has the potential to surprise the market is Visa (V -0.59%), which reports third quarter earnings Wednesday, October 29.
After producing revenue growth averaging 13.5% per year for the past three years, analysts are expecting growth to slow down significantly this year, mainly due to slower economic growth in both the U.S. and abroad. However, recent data suggests that U.S. GDP growth has been better than expected in the second quarter.
And, as we know, a company's future outlook has the ability to move shares just as much as the earnings numbers and Visa could possibly issue a rather bullish outlook, especially in regards to mobile payments. According to Standard & Poor's, mobile payments are expected to be a driver of electronic payment growth over the next few years, so any positive outlook in this area would be welcome news.
Finally, Visa's international transaction volume has been relatively weak in the last three quarters, and I think there is a pretty good chance we'll see that number begin to rebound. As Todd already pointed out, picking companies to beat earnings is a guessing game, but I think Visa has a better chance than most to post a good quarter and a great outlook.
Sean Williams: As earnings season kicks into high gear my attention has turned to oncology drug developer Medivation (MDVN).
Medivation's bread and butter is Xtandi, a late-stage prostate cancer drug that was developed in collaboration with Astellas Pharma (ALPMY 0.32%). Specifically, I won't be looking for a large beat for the third quarter as Wall Street ramped up its guidance a little less than three months ago. However, I suspect Xtandi's label expansion to the pre-chemo setting is going to catch even the most bullish Wall Street estimates off guard for the remainder of the year and beyond.
In the PREVAIL study that led to Xtandi's label expansion, the advanced prostate cancer drug in a pre-chemo setting was shown to reduce the risk of death by 29% and delayed the time patients went before having to begin chemotherapy by more than 17 months to 28 months. Furthermore, its duration of treatment was a clean year longer at 16.6 months than the control arm at 4.6 months.
Scheduled to report in the second week of November, I'm expecting a slight beat on revenue and EPS for the quarter, but substantially higher sales guidance for the remainder of 2014 and 2015. As it stands now Medivation is forecast to net $640 million in sales in 2014 and $833 million in 2015. I wouldn't be surprised to see these figures jump to $700 million and $950 million, respectively.
Remember, these are just my humble estimates and I could be wrong, but the PREVAIL data and subsequent Food and Drug Administration label expansion would indicate to me the strong potential for future outperformance.
