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Vertex Pharmaceuticals Q3 Earnings: Time To Buy Struggling NasdaqGS:VRTX Stock?

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Vertex Pharmaceuticals Incorporated (NasdaqGS:VRTX) is scheduled to report Q3 earnings results after markets close for trading on October 29, 2020.

The company is expected to report earnings of $2.32/share on revenue of $1.479 billion. The consensus earnings per share (EPS) of $2.32/share is based on a poll of 23 analysts and represents a growth in eps of 88.9% over the same quarter last year, when the company reported earnings of $1.23/share.

The revenue forecast of $1.479 billion based on a poll of 21 analysts implies a year-over-year (YoY) growth in revenue of 55.8%. Last year the company reported $949.8 million in revenue for the quarter.

Expected to report EPS growth of 88.9% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $1,479.49 $949.83 55.8%
EPS $2.32 $1.23 88.9%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Vertex Pharmaceuticals Incorporated for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $2.08 $2.61 25.2% Beat
Q1, 2020 $1.85 $2.56 38.6% Beat
Q4, 2019 $1.22 $1.70 39.9% Beat
Q3, 2019 $1.16 $1.23 5.7% Beat
Q2, 2019 $1.07 $1.26 17.3% Beat
Q1, 2019 $1.01 $1.14 13.1% Beat
Q4, 2018 $1.06 $1.30 22.3% Beat
Q3, 2018 $1.01 $1.09 8.0% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −2.4%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 30, 2020 $278.72 $272 −2.4% Decline
April 29, 2020 $256.96 $251.20 −2.2% Decline
January 30, 2020 $232.41 $227.05 −2.3% Decline
October 30, 2019 $197.89 $195.48 −1.2% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.06, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.06 implies a 2.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

Vertex Pharmaceuticals Incorporated is currently trading at $207.15/share, down −2.1% for the day. The company is trading at approximately 67.7% of its 52-week high of $306.08/share. The company’s stock price is down −23.8% since the last earnings report and down −3.4% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 27.29 suggests the company is trading in technically oversold territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:VRTX Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 25.93 and a forward P/E multiple of 21.22.

Vertex Pharmaceuticals Incorporated’s current share price also implies a price-to-book (P/B) multiple of 7.18. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $207.15
P/E Ratio 25.9x
P/E Ratio (Fwd) 21.2x
PEG Ratio −3.8
Total Debt / Total Capital 0.9%
Levered Free Cash Flow $2.557 billion
EV / EBITDA 22.2x

Finbox

Vertex Pharmaceuticals Incorporated is a large-cap stock with a market capitalization of $53.956 billion and a total enterprise value of $49.027 billion. The company operates in the Healthcare sector and the Biotechnology industry.

Vertex Pharmaceuticals Incorporated engages in developing and commercializing therapies for treating cystic fibrosis. The company markets SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO to treat patients with cystic fibrosis who have specific mutations in their cystic fibrosis transmembrane conductance regulator gene; and TRIKAFTA for the treatment of patients with CF 12 years of age or older who have at least one F508del mutation in the cystic fibrosis transmembrane conductance regulator, or CFTR, gene. Its pipeline includes Pipeline for Alpha-1 antitrypsin deficiency that is in Phase 2 clinical trial; VX-864, a second investigational small molecule corrector for the treatment of AAT deficiency, which is in Phase 1 clinical trial; and VX-147 that completed a Phase 1 clinical trial for the treatment of APOL1-mediated focal segmental glomerulosclerosis, or FSGS, and other serious kidney diseases. The company sells its products primarily to specialty pharmacy and specialty distributors in the United States, as well as specialty distributors and retail chains, and hospitals and clinics internationally. Vertex Pharmaceuticals Incorporated has collaborations with CRISPR Therapeutics AG; Arbor Biotechnologies, Inc.; Moderna, Inc.; Genomics plc; Merck KGaA; Darmstadt, Germany; X-Chem, Inc.; Janssen Pharmaceuticals, Inc.; Merck KGaA; Kymera Therapeutics; Ribometrix, Inc.; Molecular Templates, Inc.; and Affinia Therapeutics. The company was founded in 1989 and is headquartered in Boston, Massachusetts.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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