Will Gilead (GILD) Beat Q1 Earnings? - Analyst Blog

Gilead Sciences, Inc. GILD is set to report first quarter 2014 results on Apr 22 after the market closes. Last quarter, the company delivered a positive earnings surprise of 6.12%. Let's see how things are shaping up for this announcement.

Factors to Consider

We expect a meaningful contribution from potential blockbuster hepatitis C virus (HCV) treatment, Sovaldi, this quarter. The drug, approved in the U.S. in Dec 2013, made a strong debut and recorded U.S. sales of $136.4 million in its first few days on the market in the last quarter of 2013. Sovaldi was also granted marketing authorization in the EU earlier in the year. Moreover, the anti-viral franchise at Gilead is expected to continue to perform well in the first quarter of 2014 driven by treatments like Viread, Complera and Stribild. The strong performance of these products will drive the top line.

Meanwhile, the bottom line may be affected by higher operating costs as Gilead continues to develop its pipeline. Costs associated with the marketing of Sovaldi will also cause operating expenses to escalate.

Why a Likely Positive Surprise?

Our proven model conclusively shows that Gilead is likely to beat earnings this quarter because it has the right combination of two key ingredients.

Positive Zacks ESP: The Earnings ESP (Expected Surprise Prediction), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +22.67%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #3 (Hold): Note that stocks with a Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings estimates. 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 revision momentum.

The combination of Gilead's Zacks Rank #3 and an ESP of +22.67% makes us confident of an earnings beat this season.

Other Stocks to Consider

Here are some other 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

Actavis ACT has an Earnings ESP of +1.85% and holds a Zacks Rank #2 (Buy). Actavis will be reporting first quarter earnings on Apr 30.

Biogen Idec Inc. BIIB has an Earnings ESP of +8.14% and holds a Zacks Rank #3. Biogen will be reporting first quarter earnings on Apr 23.

Eli Lilly and Company LLY has earnings ESP of +4.29% and holds a Zacks Rank #3. Eli Lilly will report first quarter earnings on Apr 24.