Will Regeneron (REGN) Disappoint in Q1 Earnings? - Analyst Blog

Regeneron Pharmaceuticals, Inc. REGN is set to report its first quarter 2014 results on Feb 8 before the opening bell. Last quarter it posted a positive 103.96% earnings surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Quarter

Regeneron's fourth quarter 2013 earnings breezed past the Zacks Consensus Estimate primarily on the back of strong sales of its eye drug, Eylea. We note that Regeneron has co-developed Eylea with the HealthCare unit of Bayer (BAYRY). Eylea is expected to continue performing well and drive growth in the first quarter as well. Regeneron also posted positive earnings surprises in all of the last four quarters, with an average beat of 72.67%.

However, a number of negatives are likely to mar the overall results of Regeneron in the first quarter. Results will be affected by higher research and development expenses as Regeneron continues to develop its pipeline. Moreover, selling, general and administrative costs will increase due to costs associated with the marketing of Eylea. In addition to that, Regeneron's other two marketed drugs, Arcalyst and Zaltrap, are operating in highly competitive markets and will contribute meagrely to first quarter results.

Earnings Whispers?

Our proven model does not conclusively show that Regeneron is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below

Zacks ESP: The Earnings ESP for Regeneron is -13.13% since the Most Accurate Estimate stands at 86 cents, below the Zacks Consensus Estimate of 99 cents.

Zacks Rank #2 (Buy): Regeneron's Zacks Rank #2 increases the predictive power of ESP. But we need to have a positive ESP to be confident about an earnings beat.

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

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements, i.e., a positive Zacks Earnings ESP and a Zacks Rank #1, #2 or #3.

Medivation, Inc. MDVN has an earnings ESP of +1,033.33% and holds a Zacks Rank #3 (Hold). Medivation will be reporting first quarter earnings on May 8 after market closes.

Xenoport, Inc. XNPT has an earnings ESP of +9.09% and holds a Zacks Rank #3. Xenoport will report first quarter earnings on May 8 after market closes.