Will Evogene (EVGN) Report Wider-than-Expected Q3 Loss? - Analyst Blog

Evogene Ltd. (EVGN) is scheduled to report third-quarter 2014 results before the opening bell on Nov 10. Last quarter, the company had posted a negative earnings surprise of 18.18%. The four-quarter trailing average surprise is a negative 57.71%. Let's see how things are shaping up for this announcement.

Factors at Play

Evogene's revenues from research and development (R&D) payments may increase during the third quarter, as has been the case in the first half of 2014. These payments include various R&D services rendered by Evogene as well as upfront payments related to its several collaboration agreements. Evogene has collaboration agreements with companies like Monsanto Company (MON). However, the company's share purchase related revenues will continue to decrease.
 
Meanwhile, Evogene's R&D expenses are expected to increase in the third quarter as the company continues to develop new computational genomics and validation technologies in support of both existing and new activities. The company's primary focus areas are biotic stress and ag-chemicals. General and administrative expenses may also rise during the quarter. Higher operating expenses will significantly affect Evogene's bottom line.

Earnings Whispers?

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

Zacks ESP: Earnings ESP for Evogene is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are a loss of 10 cents per share.

Zacks Rank: Evogene carries a Zacks Rank #3 (Hold). Though a favorable Zacks Rank increases the predictive power of the ESP, the company's 0.00% ESP 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 to Consider

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

Mallinckrodt (MNK) has an earnings ESP of +3.73% and carries a Zacks Rank #2. It is expected to report fourth-quarter results on Nov 19.

Dendreon Corp. (DNDN) has an earnings ESP of +38.89% and carries a Zacks Rank #2. It is expected to report third-quarter results on Nov 11.