Health and Healthcare

Will Amgen Earnings Shape Biotech for the Rest of 2015?

biotech
Thinkstock
After markets close on Tuesday, Amgen Inc. (NASDAQ: AMGN) is scheduled to announce its first-quarter results. Among biotech companies Amgen is the second-largest measured by market cap, trailing only Gilead Sciences, and Amgen’s stock price is up more than 46% in the past 12 months, somewhat better than Gilead’s nearly 44% improvement.

While Amgen has posted a year-to-date gain of about 4.2% as of Monday’s close and Gilead has posted a year-to-date gain of around 7.2%, the SPDR S&P Biotech ETF (NYSEMKT: XBI) is up 24% and the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) is up 18%. Both exchange traded funds posted all-time highs last month, and biotech stocks have been on a tear for more than a year.

Our question is whether Amgen packs enough of a wallop to drive the industry to new heights in 2015. Consensus estimates for the first quarter call for earnings per share (EPS) of $2.10 on revenues of $4.91 billion. In each of the past three quarters, EPS have surprised to the high side by an average of $0.20 a share, or an average of nearly 10% a quarter.

ALSO READ: 4 Biotech and Pharma Stocks Projected to Rise 50% to 100%

Sequentially, the consensus EPS estimates for the first quarter call for $0.06 decline, but $0.13 more than in the first quarter of 2014, and the revenue estimate is nearly 9% higher. For the full year, analysts are looking for EPS to rise by $0.62, or 7%, to $9.32.

Amgen’s own forecast for 2015 calls for EPS of $9.05 to $9.40 on sales of $20.8 to $21.3 billion.

The consensus target price on the stock is nearly $177, and based on the most recent closing price of $165.97, the potential upside on the stock is 6.6%.

If Amgen beats the consensus EPS estimate by its three-quarter average, it will report EPS of around $2.30. That will kick-off a chain reaction that likely will lift second-quarter and full-year earnings estimates — ultimately the share price. Even though Amgen is not one of the 10 largest holdings of the XBI fund (it is 26th at just 1.08% of assets as of Monday’s close), it is the second largest holding in the IBB fund, comprising nearly 8% of the fund’s assets, just behind Biogen Idec, which comprises 8.11% of IBB’s assets.

If Amgen just matches or finishes just a penny or two better than expectations, the biotech bubble will not burst, but neither will it further puff up. A miss (unless it is a really big miss) would not damage the entire industry, but Amgen’s stock would certainly feel the pain. On the whole, good news for Amgen will be good — and maybe even better news for the whole sector — while just okay or bad news probably will not have lasting knock-on effects.

Amgen stock traded up about 1.3% in the late morning on Tuesday, at $168.15 in a 52-week range of $108.20 to $173.14. The consensus price target on the stock is $176.84.

ALSO READ: 5 Biotechs Not Keeping Up With Hot Sector in 2015

Find a Qualified Financial Advisor (Sponsor)

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.