Why Is Gilead (GILD) Up 15.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Gilead Sciences (NASDAQ:GILD). Shares have added about 15.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Gilead due for a pullback? 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 catalysts.

Gilead Misses on Q4 Earnings But Beat On Revenues

Gilead delivered earnings of $1.30 per share in the fourth quarter, declining from $1.44 in the year-ago quarter and missing the Zacks Consensus Estimate of $1.68.

Total revenues of $5.88 billion beat the Zacks Consensus Estimate by 2.68% and grew 1.44% year over year.

HIV Franchise Maintains Momentum

Product sales came in at $5.8 billion, up 2% year over year.

HCV product sales declined 14.6% to $630 million, due to lower average net selling price.

HIV product sales increased 12.2% year over year to $4.6 billion, driven by higher sales volume from the continued uptake of Biktarvy. Sales of Biktarvy were $1.6 billion, up from $578 million in the year-ago quarter.

Genvoya generated sales of $958 million, down from $1.2 billion in the year-ago quarter. Descovy recorded sales of $437 million, up from $411 million in the year-earlier period, while Odefsey sales were $435 million, down from $448 million a year ago.CAR-T therapy Yescarta (axicabtagene ciloleucel) generated $122 million in sales, up from $81 million a year ago, driven by a higher number of therapies provided to patients and its continued expansion in Europe. Sales also grew from $118 million in the previous quarter.

Other product sales — chronic hepatitis B (HBV) drugs, cardiovascular, oncology and other categories (Vemlidy, Viread, Letairis, Ranexa, Zydelig and AmBisome) — were $467 million, which decreased from $797 million in the year-ago quarter due to declines in Ranexa and Letairis sales after generic entries in 2019.

Adjusted product gross margin was 75.7% compared with 77.9% in the year-ago period. Research & development (R&D) expenses came in at $1.03 billion, up from $939 million in the year-ago quarter. Selling, general and administrative (SG&A) expenses increased to $1.13 billion from $1.03 million in the year-ago quarter.

2019 Results

Sales came in at $22.4 billion, up from $22.1 billion in 2018. Earnings per share came in at $6.63, down from $6.67 in 2018.

2020 Guidance

Gilead expects sales of $21.8-$22.2 billion for 2020. Adjusted product gross margin is anticipated to be 86-87%. Adjusted earnings per share are expected between $6.05 and $6.45. Including stock-based compensation expenses, earnings for 2020 are expected to be $6.13. The Zacks Consensus Estimate for 2020 earnings per share is $7.06 on sales of $22.53 billion.

Dividend and Share Repurchase

During 2019, Gilead generated $9.1 billion in operating cash flow, paid $5.6 billion in connection with the global research and development collaboration agreement with Galapagos and equity investments in Galapagos, repaid $2.8 billion of principal amount of debt, paid out cash dividends of $3.2 billion and utilized $1.7 billion on stock repurchases.

Other Updates

Gilead submitted a New Drug Application under priority review to the FDA for filgotinib for the treatment of adults with moderate-to-severe rheumatoid arthritis (RA).

The European Medicines Agency validated the marketing authorization application and the company submitted a Biologics License Application to the FDA for KTE-X19, an investigational chimeric antigen receptor (CAR) T cell therapy, for the treatment of adult patients with relapsed or refractory mantle cell lymphoma (MCL).

The company also collaborated with Kiniksa Pharmaceuticals, Ltd. to conduct a phase II, multicenter study of mavrilimumab, an investigational, fully-human monoclonal antibody that targets granulocyte macrophage colony stimulating factor receptor alpha, in combination with Yescarta in patients with relapsed or refractory large B-cell lymphoma.

The China National Medical Products Administration approved Vosevi for the treatment of chronic HCV infection in adults without cirrhosis or with compensated cirrhosis, who have failed prior treatment with a direct-acting antiviral therapy.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11.11% due to these changes.

VGM Scores

Currently, Gilead has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Gilead has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.