Pharmaceutical Stocks to Watch: Earnings Surprises Ahead

Introduction

Earnings are arguably the most telling metric on a company’s quarterly financial report, especially in the pharmaceutical sector. As investors, understanding and anticipating earnings surprises can significantly impact stock performance. This article explores two medical stocks—Moderna (MRNA) and Tactile Systems Technology (TCMD)—that are currently on the radar for potential earnings beats based on their Earnings ESP (Expected Surprise Prediction) metrics.

The Importance of Earnings ESP

The Earnings ESP tool serves as a crucial barometer for investors looking to capitalize on earnings surprises. The ESP compares the Most Accurate Estimate (i.e., the most recent earnings projection) with the consensus estimate to derive a percentage difference—this number, the ESP figure, can indicate the likelihood of the company beating earnings expectations.

When a stock possesses a positive Earnings ESP alongside a strong Zacks Rank (with a rank of #3, Hold, or better), historical data indicates a high probability of reporting an earnings surprise. In fact, the combination has yielded a successful prediction rate of around 70%. Additionally, stocks that fall into the Buy or Strong Buy categories tend to outperform the market significantly, demonstrating the effectiveness of this approach.

Spotlight on Moderna (MRNA)

Now, let’s delve into Moderna, which is currently earning a Zacks Rank of #3 (Hold). Moderna is preparing to report its earnings on November 7, 2024, with the Most Accurate Estimate set at -$1.80 per share. This gives MRNA a positive Earnings ESP of +2.4%, calculated by the percentage difference between the Most Accurate Estimate and the consensus estimate of -$1.84.

Investors may want to monitor MRNA closely, not only due to its vaccine development prowess but also because biotechnology stocks are particularly responsive to earnings surprises. Given Moderna’s strong brand recognition and foundational role in mRNA technology, the upcoming earnings report could act as a catalyst for upward movement in its stock price.

Examining Tactile Systems Technology (TCMD)

Another stock to consider is Tactile Systems Technology, which is also rated as a Zacks Rank #3 (Hold) and is set to report earnings on November 4, 2024. TCMD’s Most Accurate Estimate currently stands at $0.19 per share. This provides TCMD with a solid Earnings ESP of +7.04%, which brings together the Most Accurate Estimate and a consensus estimate of $0.18.

Tactile Systems Technology specializes in innovative medical devices that assist patients with chronic conditions, notably lymphedema and venous disease. The market for such devices continues to expand, and TCMD’s strong earnings projection may suggest an opportunity for growth—especially if the company manages to exceed earnings expectations in the near term.

What Does This Mean for Investors?

For investors in the pharmaceutical and biotech sectors, the identification of stocks with positive Earnings ESP metrics is crucial. Both Moderna and Tactile Systems Technology fit this criterion, potentially allowing investors to capitalize on favorable earnings surprises.

Utilizing tools like the Earnings ESP Filter can help investors uncover additional opportunities, ensuring that they remain competitive in the rapidly evolving pharmaceutical landscape. Stocks in the biotech space can display high volatility, particularly around earnings announcements, making an understanding of these nuances even more critical for optimizing investment strategies.

Conclusion

Earnings surprises can serve as pivotal moments for pharmaceutical stocks, influencing both investor sentiment and market performance. Moderna and Tactile Systems Technology are two stocks that exemplify the invaluable insight the Earnings ESP framework can provide. With their potential to exceed earnings expectations, these companies are worth watching closely in the lead-up to their respective earnings reports. As we approach the end of the year, staying attuned to both earnings trends and market dynamics will be essential for informed investment decisions in the pharmaceutical sector.

Investing wisely in stocks like MRNA and TCMD could yield profitable outcomes, so remain vigilant and consider incorporating these insights into your overall investment strategy.