I’m not going to sugarcoat it — this earnings season has not been for the faint of heart. For every earnings success story, there are several disappointments. Biotechnology stocks in particular have gotten hit with profit taking in recent weeks.
I don’t know about you, but I never like to see one of my stocks fall on earnings news. I spend a lot of time hand-picking stocks to avoid this exact scenario. The unfortunate reality is this is one of the toughest earnings seasons in years. So, we’re seeing a lot of sales and earnings misses.
If one of your stocks falls after earnings, the important thing is to get all of the facts before selling. What caused the selloff? Was it a sales or earnings miss? Did the company’s forward guidance fall below the Street view? Are investors using this as an excuse to take profits?
To help you decipher the mixed signals, run your stock in question through Portfolio Grader. If the stock earns a D or F, that’s your signal to sell into any near-term strength you can get. If the stock earns a C, you’ll want to continue holding it until it is either upgraded or downgraded. And if the stock earns an A or B, you could very well have a buying opportunity on your hands.
The fact of the matter is that stocks pull back for any number of reasons. Sometimes those reasons are legitimate, and sometimes they’re not. In the latter case, this can open up buying opportunities for the savvy stock picker.
So today, let’s review three healthcare companies that have pulled back …but are poised for an impressive rebound:
Comeback Story #1: Lannett Company, Inc. (LCI)
Last week, shares of fell 12% after LCI stock missed sales expectations for the fiscal third quarter. As I’ll explain shortly, I consider this a knee-jerk reaction; Lannett Company had an otherwise strong quarterly announcement.
Last quarter marked the thirteenth consecutive quarter of sales and earnings growth for Lannett Company. Compared with the year ago quarter, net sales climbed 24% to $99.4 million. This missed the $100.7 million consensus sales estimate by a hair.
Over the same period, net income jumped 58% to $36.2 million or 97 cents per share. Analysts were expecting 95 cents per share. So, LCI posted a 2.1% earnings surprise.
Lannett also lifted its full-year guidance. Looking ahead to fiscal year 2015, LCI forecasts net sales in a range of $403 million to $408 million, or between 47% and 49% annual sales growth. This is higher than its previous guidance of $395 million to $405 million. Meanwhile, the analyst community is calling for 48.8% annual sales growth and 101% earnings growth.
LCI has gotten hit with some profit taking as of late, but I expect Lannett to bounce back. The fact remains that the Lannett is fundamentally healthy, and LCI stock trades at less than 15 times forecasted earnings. LCI is an A-rated “strong buy.”
Comeback Story #2: ANI Pharmaceuticals Inc (ANIP)
ANI Pharmaceuticals Inc (NASDAQ:ANIP) also had a rough week when ANIP plunged after announcing first-quarter earnings and sales results.
ANIP revenues increased 72% year over year to $18.8 million, up from $10.9 million in Q1 2014. Operating income surged 170% year over year to $9.6 million, while adjusted earnings were 57 cents per share.
The consensus estimate was for earnings of 56 cents per share on $19.86 million in sales. So, ANI Pharmaceuticals posted a slight earnings surprise and just missed sales estimates.
For full year 2015, ANIP reiterated guidance, expecting sales between $80 million and $88 million and adjusted earnings per share between $2.44 and $2.67, which is below the current consensus estimate for earnings of $2.79 per share on $92.06 million in sales.
Because guidance was weaker than expected, ANIP stock pulled back. However, this is still strong earnings and sales growth, as ANI Pharmaceuticals’ estimates represent between 43% and 57% annual sales growth and between 114% and 134% annual earnings growth.
So, with an A-rating, ANIP is a good “buy” on this dip.
Comeback Story #3: Centene Corp (CNC)
Recently, shares of Centene Corp (NYSE:CNC) fell after investors used the CNC stock’s minuscule sales miss as an excuse to take profits. However, as you’ll see, the report was quite strong otherwise.
Centene reported that earnings grew 79.3% year over year, while sales increased 42% year over year in the first quarter. CNC stock posted earnings of 52 cents per share on $4.8 billion in sales, up from earnings of 29 cents per share and sales of $3.4 billion in Q1 2013. This beat the consensus estimate for earnings of 48 cents per share and just missed estimates for $5.12 billion in sales.
Centene Corporation noted that the increase in revenues was thanks to new programs and expansions in several of their states, particularly Illinois, Ohio and Florida. During the first quarter, CNC served 331,800 Medicaid members and boosted managed care membership by 44% to 4.4 million.
For full year 2015, Centene Corporation expects sales between $20.5 billion and $21 billion and earnings per share between $2.60 and $2.72. This is relatively in line with the current consensus estimate for earnings of $2.63 per share on $21.89 billion in sales. CNC is also an A-rated “strong buy.”
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
