Specialty pharma giant Allergan Plc (NYSE:AGN) reports earnings Monday morning. But in front of the quarterly release, are there clues as to whether AGN will prove to be a bullish, bearish or neutral event?
Let’s take a look at AGN stock’s recent quarterly announcements, analyst views, AGN price chart and what, if anything, the options market is estimating in front of the earnings report.
AGN Earnings Picture
In front of AGN’s Monday morning second-quarter earnings release, Wall Street’s analyst community is forecasting profits of $3.34 per share of AGN. Views range from $3.10 to $3.58.
The current consensus estimate compares to last year’s, same quarter result of $4.41 and represents a decline of 25%. Nonetheless, full-year profit views are for AGN to earn $14.17 in 2016 which would be good for a year-over-year increase of 5.5%.
On the sales side, conditions are also a bit bumpy. Allergan’s revenues are expected to drop to $4.1 billion versus 2015’s Q2 result of $5.7 billion. Sequentially though, sales are expected to gain 8% compared to Q1’s sales of $3.8 billion.
The big picture shows a smoother and more bullish view for revenues as full-year sales forecasts for AGN are pegged at $16.7 billion. That’s an increase of 10.9% over 2015’s $15.1 billion. Looking further out, Allergan is expected to see a sales gain of 9.1% in 2017 on revenues of $18.2 billion.
Of 21 analysts polled by CNN Money, 15 firms have buy recommendations on AGN stock, three offer an outperform on shares and a trio maintain hold ratings.
At the same time, with AGN fetching roughly $252.50, the median target price is $295 with a range of $232 to $400.
AGN Stock Short-Term Trading Record
AGN has established a decent record of beating Street profit views. Over the last 12 quarters the company has topped estimates 83% of the time with 10 beats, one in-line result and one profit miss.
Investor reaction in AGN stock has proven a bit more varied. Shares have notched two price gains and four declines in the immediate aftermath of Allergan’s earnings.
Working backwards, AGN has moved 5.28%, 3.65%, -0.53%, -5.10%, -0.85% and -0.79% over the past several quarters.
The overall investor reaction in AGN stock has resulted in a modest average gain of 0.28%, but with variability of 3.70% based on a one standard deviation reading.
AGN’s seven-day stock performance does deviate from the immediate one-day reaction by investors. Over the last six quarters AGN has gained an average of 2.37% with a one standard deviation of 5.09%.
AGN Stock Daily Chart
AGN’s price chart describes a stock that’s been in the possession of bears throughout 2016. But for bullish — and in this case contrarian — investors, there is hope yet in AGN.
After hitting an all-time-high of $340 just over a year ago, AGN stock has trended lower. And since the beginning of this year, AGN has remained firmly in bear territory below the widely watched 200-day simple moving average.
Having said that, a corrective move in excess of 40%, along with the lengthy time spent in a downtrend, does lend itself to the possibility AGN is turning the corner technically as it attempts to establish a new uptrend.
On the other hand and for the still-in-control bears, a decent price run off AGN’s May low and into fairly significant layers of technical resistance from roughly $250 – $275, presents an opportunity to short Allergan shares and fade the current counter-trend rally.
AGN Stock Options Pricing
Trading activity on Wednesday was fairly unassuming and the options trading which did transpire, may be related to Tuesday’s rumors of Allergan’s interest in acquiring biotech giant Biogen Inc (NASDAQ:BIIB).
With a fair bit more authority, we can point to AGN’s options traders assigning a 68% chance shares will remain within a range of $238.50 to $267 through next Friday.
The math behind the AGN price range calculation is based on the at-the-money weeklys August 12 $252.50 straddle market which trades on implied volatility of 36% with nine calendar days left.
The weeklys contract is the purest play on Allergan’s earnings event and tells us what traders collectively expect from AGN stock in the immediate aftermath of its quarterly announcement.
Net, net the expected dollar move up or down works out to about 5.7% by next Friday’s close. It’s not a perfect time comparison, but it is within the range of what we’d expect to see in AGN stock based on recent 7-day reaction readings and points to normal event risk for AGN next week.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
