Perrigo Company plc PRGO is scheduled to report second-quarter 2020 results on Aug 5.

The company’s earnings beat estimates in three of the past four quarters and missed the same once, delivering an average surprise of 4.96%.

Shares of Perrigo have gained 6.1% so far this year against the industry‘s decrease of 0.6%.

Factors at Play

The addition of products following the acquisition of Ranir Global Holdings is likely to have boosted sales of Perrigo’s Consumer Self Care Americas (“CSCA”) and Consumer Self Care International (“CSCI”) segments in the second quarter. Moreover, the new products have been witnessing significant sales — a trend that most likely continued in the soon-to-be-reported quarter. Moreover, acquisition of Oral Care Assets of High Ridge Brands in April is likely to have contributed to sales in the second quarter.

However, loss of sales from the recall of Ranitidine, discontinued products and exited business, especially its Animal Health business sold to PetIQ PETQ, might have offset the gain from the new products.

Although Perrigo is looking to spin-off its Rx business, higher sales of new products in the Rx segment and continued moderation of pricing pressure in the generics industry are likely to have driven segment sales.

Meanwhile, the impact of stockpiling by customers amid COVID-19 pandemic in the first quarter is likely to have reversed and is unlikely to have driven Perrigo’s revenues in the soon-to-be reported quarter.

However, the favorable impact of the ongoing restructuring initiatives and operating expense discipline are likely to have boosted the bottom line.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Perrigo in this reporting cycle. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here as you will see below.

Earnings ESP: Perrigo’s Earnings ESP is +0.19%. The Zacks Consensus Estimate is pegged at 87 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Perrigo carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stock to Consider

Here are two biotech stocks that have the right combination of elements to beat on earnings this time around.

Arena Pharmaceuticals, Inc. ARNA has an Earnings ESP of +12.88% and a Zacks Rank #3.

Incyte Corporation INCY has an Earnings ESP of +4.62% and a Zacks Rank #3.

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