Gilead Sciences (GILD) Down 3.4% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Gilead Sciences, Inc. (NASDAQ:GILD) . Shares have lost about 3.35 % in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is GILD due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Gilead’s HCV Sales Weak, Earnings Beat

Gilead reported fourth-quarter 2017 results wherein both earnings and revenues surpassed expectations. However, management issued a bleak view for 2018.

The company’s fourth-quarter earnings of $1.78 per share beat the Zacks Consensus Estimate of $1.70. However, earnings were below the year-ago quarter figure of $2.70 per share.

Moreover, total revenues of $5.9 billion topped the Zacks Consensus Estimate of $5.8 billion. However, revenues declined 18.7% year over year.

Harvoni & Sovaldi Plunge Further

Product sales came in at $5.8 billion, down 19.1% year over year. The decline was due to lower HCV sales, partially offset by higher sales across HIV and other therapeutic areas.

Antiviral product sales, which include Gilead's HIV and liver disease portfolio, came in at $5.2 billion in the quarter, down 21.2%.

HCV product sales, which include Harvoni, Sovaldi, Epclusa and Vosevi, were $1.5 billion, down from $3.2 billion reported in the year-ago quarter. The downside was mainly attributed to lower sales of Harvoni and Sovaldi across all major markets.

Sales of Harvoni declined 60.7% year over year to $644 million in the quarter. Further, Sovaldi sales recorded a steep year-over-year decline of 78.4% to $117 million.

Epclusa garnered sales of $565 million in the quarter, down from the year-ago figure of $1.0 billion.

Meanwhile, HIV and HBV product sales came in at $3.7 billion, up 8.8% year over year. The increase was primarily driven by continuous strong uptake of tenofoviral afenamide (TAF)-based products such as Genvoya, which generated sales of $1,060 million, up from $563 million in the year-ago quarter, Descovy, which recorded sales of $365 million, up from $149 million, and Odefsey, which registered sales of $325 million, up from $155 million. HIV treatments like Stribild and Complera/Eviplera sales declined 42.6% and 25.2% respectively. Viread sales were down at $212 million, down 34.6%.

Atripla sales tanked 27.5% to $440 million, while Truvada sales fell 8.2% to $797 million.

Other products like Letairis, Ranexa, AmBisome and Zydelig recorded sales of $233 million (up 3.1%), $200 million (down 4.7%), $90 million (down 4.4%) and $39 million, respectively.

Research & development (R&D) expenses declined 11.9% to $845 million due to the 2016 impact of ongoing milestone payments. Selling, general and administrative (SG&A) expenses decreased 1.6% to $923 million. Adjusted product gross margin was 83.5% compared to 88.1% in the year-ago period.

2017 Results

Revenues in 2017 came in at $26.1 billion, down from $30.4 billion in 2016 and surpassed Zacks Consensus Estimate of $25.9 billion. Earnings per share came in at $8.84, down from $11.57 in 2016 and beat the Zacks Consensus Estimate of $8.73.

2018 Guidance

Gilead now expects net product sales in the range of $20-$21 billion. Adjusted R&D expenses and adjusted SG&A expenses are projected in the range of $3.4-$3.6 billion and $3.4-$3.6 billion, respectively. Adjusted product gross margin is expected in the range of 85-87%.

Acquisitions

The company acquired Kite Pharma in 2017. The FDA approval for Yescarta, a CAR-T therapy for the treatment of adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy should Gilead’s prospects.

The company recently announced that it will acquire Cell Design Labs to expand further in the CAR-T space.

Dividend and Share Repurchase

Concurrently, Gilead declared a cash dividend of 57 cents per share of common stock for first-quarter 2018, an increase of 10%. The dividend is payable on Mar 29 to stockholders of record at the close of business on Mar 16. During 2017, the company paid cash dividends of $2.7 billion and repurchased shares for $954 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.

Gilead Sciences, Inc. Price and Consensus

Gilead Sciences, Inc. Price and Consensus | Gilead Sciences, Inc. Quote

VGM Scores

At this time, GILD has a poor Growth Score of F, however its Momentum is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, GILD has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.