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What's in the Cards for AstraZeneca (AZN) in Q3 Earnings?

Zacks Equity Research logoZacks Equity Research 10/21/2019 Zacks Equity Research

AstraZeneca PLC AZN is scheduled to report third-quarter 2019 results on Oct 24.

The company’s earnings beat estimates in each of the past four quarters with the average surprise being 62.97%.

Shares of AstraZeneca have increased 15.5% so far this year against the industry‘s decrease of 0.4%.

a close up of a map© Provided by Zacks Investment Research Inc

In the last reported quarter, AstraZeneca delivered a positive earnings surprise of 15.63%.

Factors at Play

Sales of newer medicines are expected to have benefited the company’s top line by offsetting the loss in sales due to loss of exclusivity of older drugs like Crestor, Nexium and Seroquel XR.

New oncology drugs, which include Lynparza, Tagrisso and Imfinzi, have seen strong demand in their indications. We expect these three drugs to have contributed to the third-quarter revenues.

Sales of Tagrisso almost doubled in the second quarter on the back of strong demand in first-line setting for advanced lung cancer. The trend is likley to have continued in the third quarter. The drug was approved in China for first-line advanced lung cancer in September. The extent of the impact of this deal on third-quarter results remains to be seen.

Sales of Lynparza, which is marketed in collaboration with Merck MRK, are likely to have been driven by expanded use in ovarian and breast cancer. Particularly, a successful launch in first-line ovarian cancer setting has driven the drug’s sales in United States late last year, a trend that most likely continued in the third quarter. The drug received approval in Europe and Japan for a similar indication in June, which is expected to have resulted in additional sales in the third quarter.

Third-quarter sales of Imfinzi are likely to have benefited from strong demand trend in the United States, especially in lung cancer indications.

AstraZeneca’s other major new drugs include Brilinta and Farxiga, which are approved for cardiovascular disease and diabetes, respectively. We expect these blockbuster drugs to have contributed significantly to the soon-to-be reported quarter’s results. However, weak sales of Farxiga are likely to have continued in the U.S. and European markets due to increased competition. European approval for label expansion of Farxiga in August to include type II diabetes might have helped the company to partially offset lower sales due to competition.

AstraZeneca’s COPD drug Symbicort’s sales have been declining due to pricing pressure and competition. These factors might have impacted third-quarter sales of the drug.

Sales of AstraZeneca’s major legacy drugs have been declining due to rising generic competition. The trend is likely to have continued in the third quarter.

Multiple clinical studies on its approved drugs for label expansion as well as for developing new treatment regimens are expected to have increased operating expenses in the third quarter. Moreover, operating expenses are expected to have been higher due to commercial initiatives to support launch and sales of new drugs and label expansions.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for AstraZeneca in this reporting cycle. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (46 cents) and the Zacks Consensus Estimate (47 cents) is -2.13%.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AstraZeneca carries a Zacks Rank #3.

AstraZeneca PLC Price and Consensus

  a close up of a map: AstraZeneca PLC Price and Consensus© Provided by Zacks Investment Research Inc AstraZeneca PLC Price and Consensus

AstraZeneca PLC price-consensus-chart | AstraZeneca PLC Quote

Stocks That Warrant a Look

Here are some biotech stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Incyte Corporation INCY has an Earnings ESP of +1.15% and a Zacks Rank #1. The company is scheduled to release third-quarter results on Oct 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

GlaxoSmithKline GSK has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Oct 30.

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