Monday, February 10, 2020

Allergan Earnings Preview: Could be Just What the Doctor Ordered

  • China
  • Dollar
  • Gold
  • Euro
  • Stocks

What’s happening: Allergan plc is scheduled to report its earnings results for the fourth quarter before the opening bell on Monday.

What happened: Allergan had reported strong results for the third quarter, with a weak performance in the Immunology segment being offset by a solid performance in the Hematologic Oncology unit. Over the past three months, the earnings and revenue estimates for the fourth quarter have been revised upwards several times. 

  • The consensus revenue estimate stands at $4.09 billion, representing 0.2% year-on-year growth
  • The estimate for earnings is $4.53 per share, with 5.6% growth versus the same quarter in the previous year.

Why it matters: Expectations are soaring. That’s not only because investors have been having a field day, with most companies reporting better-than-expected results this earnings season and the US stock indices breaking record highs.

Another reason Allergan’s investors are eagerly waiting for good news is that the pharma company has beaten earnings and revenue estimates every time for the past two years. 

Allergan is due to be acquired by the American biopharma company AbbVie in a cash-and-stock transaction worth around $63 billion. The acquisition is expected to close in the current quarter. 

Allergan’s fourth-quarter sales may have been hit to some extent by divestitures and the loss of exclusivity on a few brands. On the other hand, the pharma giant recently announced the shipment of the 100 millionth vial of Botox from the Westport campus in Ireland. Earlier this year, the company opened a state-of-the-art Biologics 2 facility at its Westport campus, with an investment of €160 million.

How the shares have performed so far: Allergan’s shares have climbed more than 45% over the past year, versus a mere 4.2% rise in the industry. 

After delivering a strong performance for most of 2019, the pharma stock started this year on a low note. Allergan’s shares slid to a three-month low in January, although most of this loss has already been regained.

What to watch: The market will watch the S&P 500, where Allergan is a major constituent. The Irish-domiciled pharmaceutical company is expected to provide details on the progress of the AbbVie deal. Also, management may throw some light on the launch plans for its oral CGRP antagonist for migraine, Ubrelvy, which was approved by the FDA in December.


Support & Resistances for Today

Technical Levels News Sentiment
GBP/JPY - 140.8 and 145 Negative
Japan 225 - 23750 and 24450 Negative
USD/JPY - 106.5 and 109.875 Positive
Bitcoin - 7700 and 9000 Positive
Gold - 1495 and 1600 Positive


Markets Today

Stocks in Asia declined in Monday morning trade, with no news of a cure in sight for the deadly coronavirus.

Context: China’s Shanghai composite slipped 0.39%, while Hong Kong’s Hang Seng index lost 0.8%. Chinese stocks fell even after coming off a week that was the worst in nine months, as the coronavirus keeps the shutters down on several manufacturing facilities in the country.

Details: China’s stock market had posted a sharp decline of around 8% last Monday, its biggest downturn in more than four years. Chinese stocks closed 3.4% lower for the week.

  • The real estate sub-index fell 6.7%, registering its worst week since April 2019
  • The CSI300 financial sector sub-index closed down 4.9%, posting its worst weekly decline since May 2019. 

Earlier today, China reported that its inflation rate had jumped to 5.4% in January, reaching the highest level in eight months. The sudden surge in inflation from the previous month’s 4.5% came as a surprise. The country’s producer prices also rose 0.1% in January, their highest increase since May 2019, after having declined 0.5% in December.

Why the markets declined: China being the epicenter of the coronavirus, which has claimed over 900 lives so far, is facing the worst impact on the economy. The confirmed coronavirus cases have risen to over 40,000 in mainland China, according to China's National Health Commission. The authorities confirmed that the virus has now claimed more lives than the severe acute respiratory syndrome (SARS) outbreak in 2003.

Why it matters: The virus outbreak has dampened the world’s second-largest economy. The disruption to factories has affected the supply chains of various companies across the globe and could further impact China’s economy. Citigroup also already lowered its 2020 growth forecast for the country from 5.8% to 5.5%. 

What to watch: The market will watch for some strong economic data and the US markets for any support.


Market Snapshot

Futures at 0400 (GMT)
EUR/USD (1.0951, 0.08%) Dow ($29,117, 0.25%) Brent ($54.64, 0.3%)
GBP/USD (1.29, 0.07%) S&P500 ($3,333, 0.23%) WTI ($50.42, 0.2%)
USD/JPY (109.84, 0.10%) Nasdaq ($9,434, 0.30%) Gold ($1,572, -0.2%)


News Shaping the Markets Today

  • The Australian stock market is extending losses on Monday
  • China’s inflation rises to highest in 8 years
  • Japan’s current account surplus widens in December
  • Coronavirus death cases exceed SARS
  • US equity futures rise pointing to higher open


What else to watch today

Turkey’s unemployment rate, Italy's industrial production, Canadian housing starts and building permits, U.S. TD Ameritrade Investor Movement Index and Federal Reserve Governor Michelle Bowman speech.