Gilead Sciences Inc. (NASDAQ: GILD) is scheduled to release its third-quarter financial results after the markets close on Tuesday. The health care sector has been under fire recently, and some are wondering if it is near a bottom. Although Gilead has been falling for about a year now, the valuation is looking more favorable — assuming Gilead is not a value trap. The upcoming report will help shed some light on where the company stands.
The consensus estimates from Thomson Reuters call for $2.86 in earnings per share (EPS) and $7.45 billion in revenue. The same period of last year reportedly had $3.22 in EPS and revenue of $8.29 billion.
Currently Gilead trades at a cheap price-to-earnings ratio (P/E) of 6.3, against 2016 earnings, and the 2017 P/E ratio is not much different.
Second-quarter total revenues met consensus and earnings per share beat on strength in Sovaldi/HIV franchise. Full-year 2016 product sales guidance was lowered. HCV sales missed due to pricing, unfavorable payer mix, lower patient starts and shorter treatment duration. Share buybacks are expected to be lower for the rest of 2016, and many on Wall Street think that could suggest willingness for pipeline acquisitions.
Top analysts think that a spin-off of the hepatitis C silo of the business is entirely possible as the declining predictable revenues have weighed on the company’s overall valuation. While not a given, a transaction could improve long-term growth and improve the positive impact of a future acquisition or pipeline success.
A few analysts weighed in on Gilead ahead of the earnings report:
- William Blair reiterated an Outperform rating.
- Jefferies has a Buy rating with a $95 price target.
- Cowen has a Buy rating with a $120 price target.
- Piper Jaffray reiterated an Overweight rating.
- Robert Baird reiterated an Outperform rating with a $100 target.
- Evercore ISI has a Buy rating with a $90 price target.
- RBC Capital Markets has a Buy rating with a $95 price target.
So far in 2016, Gilead has vastly underperformed the broad markets, with the stock down about 27%. Over the past 52 weeks, the stock is down 32.5%.
Shares of Gilead traded at $74.10 on Tuesday, with a consensus analyst price target of $99.70 and a 52-week trading range of $72.21 to $109.73.