Perrigo Company (PRGO) Q2 Earnings: What's In The Cards?

Perrigo Company plc (NYSE:PRGO) is expected to report second-quarter 2017 results before the opening bell on Aug 10. Overall, the company has an average trailing four-quarter positive earnings surprise of 2.47%. Last quarter, the company delivered a positive surprise of 7.14%.

Perrigo’s shares have lost 19% so far this year, while the industry witnessed an increase of 18.3%.

Let’s see how things are shaping up at the company this quarter.

Factors Influencing This Quarter

Price erosion and changing market dynamics across Perrigo’s Prescription Pharmaceuticals (Rx) segment is likely to continue hurting the company’s performance. The company continues to expect a tough drug pricing environment to impact the segment’s performance. It anticipates price erosion of approximately 9-10% at the Rx segment in the coming quarters.

The Branded Consumer Healthcare (BCH) business, a part of Consumer Health Care International (CHCI) segment, is still being impacted by unfavorable market dynamics in countries like Belgium, France, Germany and Italy. This BCH segment is projected to underperform in the yet-to-be-reported quarter due to lower-than-expected revenues from certain high-margin products.

The U.S. Department of Justice Antitrust Division has been conducting an investigation at Perrigo, seeking information about the latter’s drug pricing practices. In May, the company announced that search warrants were executed at its corporate offices associated with the ongoing investigation. Hence, the company’s pricing strategies might get affected by such probes.

However, Perrigo’s constant focus to pursue additional branded OTC opportunities in the U.S. market as well as product acquisitions and new products launches in the Rx segment are expected to boost sales in the future quarters. The ongoing restructuring initiatives and operating expense discipline are expected to support the bottom line.

Earnings Whispers

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

Zacks ESP: The Earnings ESP for Perrigo is -2.13% as the Most Accurate estimate is pegged at 92 cents per share, while the Zacks Consensus Estimate stands at 94 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Although Perrigo’s Zacks Rank #3 (Hold) increases the predictive power of ESP, its negative Earnings ESP leaves our earnings surprise prediction inconclusive.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some other companies to consider as our model shows that they have the right combination of elements to come up with an earnings beat this quarter:

Zoetis Inc. (NYSE:ZTS) is scheduled to release results on Aug 8 with an Earnings ESP of +1.89% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesaro, Inc. (NASDAQ:TSRO) is scheduled to release results on Aug 8. The company has an Earnings ESP of +17.06% and a Zacks Rank #3.

Esperion Therapeutics, Inc. (NASDAQ:ESPR) is scheduled to release results on Aug 8. The company has an Earnings ESP of +17.37% and a Zacks Rank #3.

5 Trades Could Profit "Big-League" from Trump Policies

If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.

Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>