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The third quarter earnings season has just begun. Some companies manage to consistently surprise the market with positive earnings reports. If you believe that company characteristics can allow EPS surprises to persist across reporting seasons, you may be very interested in this list.

We ran an analysis of stocks in the biotech industry for those that have demonstrated this persistence in EPS surprises, with a significant average of positive EPS surprises over the last four quarters.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬



We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.



Do you think these companies will surprise us once more? Use this list as a starting-off point for your own analysis.

List sorted by average earnings surprise.

1. AVEO Pharmaceuticals, Inc. (AVEO):
Engages in the discovery and development of cancer therapeutics. Market cap of $726.67M. In Sep 2010: Reported EPS at -0.6 vs. estimate at -0.62 (surprise of 3.2%). In Dec 2010: Reported EPS at -0.3 vs. estimate at -0.64 (surprise of 53.1%). In Mar 2011: Reported EPS at 2.28 vs. estimate at -0.57 (surprise of 500%). In Jun 2011: Reported -0.16 vs. estimate at -0.75 (surprise of 78.7%). [Average earnings surprise at 158.75%]. The stock is a short squeeze candidate, with a short float at 6.28% (equivalent to 8.64 days of average volume). The stock has had a couple of great days, gaining 9.2% over the last week.

2. Cornerstone Therapeutics Inc. (CRTX):
Engages in the acquisition, development, and commercialization of branded and generic pharmaceuticals primarily for the respiratory and related markets in the United States. Market cap of $181.72M. In Sep 2010: Reported EPS at 0.15 vs. estimate at 0.04 (surprise of 275%). In Dec 2010: Reported EPS at 0.2 vs. estimate at 0.12 (surprise of 66.7%). In Mar 2011: Reported EPS at 0.17 vs. estimate at 0.15 (surprise of 13.3%). In Jun 2011: Reported 0.11 vs. estimate at 0.06 (surprise of 83.3%). [Average earnings surprise at 109.58%]. The stock has had a couple of great days, gaining 10.24% over the last week.

3. Neuralstem, Inc. (CUR):
Focuses on the development and commercialization of treatments for central nervous system diseases based on transplanting human neural stem cells and small molecule drugs. Market cap of $60.61M. In Sep 2010: Reported EPS at -0.09 vs. estimate at -0.11 (surprise of 18.2%). In Dec 2010: Reported EPS at -0.05 vs. estimate at -0.1 (surprise of 50%). In Mar 2011: Reported EPS at -0.07 vs. estimate at -0.1 (surprise of 30%). In Jun 2011: Reported -0.08 vs. estimate at -0.11 (surprise of 27.3%). [Average earnings surprise at 31.37%]. It's been a rough couple of days for the stock, losing 6.72% over the last week.

4. Array BioPharma, Inc. (ARRY):
Focuses on the discovery, development, and commercialization of small molecule drugs to treat patients afflicted with cancer and inflammatory diseases in North America, Europe, and the Asia Pacific. Market cap of $130.58M. In Sep 2010: Reported EPS at -0.2 vs. estimate at -0.28 (surprise of 28.6%). In Dec 2010: Reported EPS at -0.23 vs. estimate at -0.28 (surprise of 17.9%). In Mar 2011: Reported EPS at -0.2 vs. estimate at -0.25 (surprise of 20%). In Jun 2011: Reported -0.17 vs. estimate at -0.27 (surprise of 37%). [Average earnings surprise at 25.88%]. The stock is a short squeeze candidate, with a short float at 5.96% (equivalent to 7.39 days of average volume). The stock has had a couple of great days, gaining 15.08% over the last week.

5. Jazz Pharmaceuticals, Inc. (JAZZ):
Develops and commercializes products for neurology and psychiatry primarily in the United States. Market cap of $1.84B. In Sep 2010: Reported EPS at 0.41 vs. estimate at 0.34 (surprise of 20.6%). In Dec 2010: Reported EPS at 0.63 vs. estimate at 0.6 (surprise of 5%). In Mar 2011: Reported EPS at 0.59 vs. estimate at 0.57 (surprise of 3.5%). In Jun 2011: Reported 0.82 vs. estimate at 0.79 (surprise of 3.8%). [Average earnings surprise at 8.22%]. This is a risky stock that is significantly more volatile than the overall market (beta = 2.27). The stock has had a couple of great days, gaining 5.95% over the last week.

6. Immunogen Inc. (IMGN):
Engages in the research and development of antibody-based anticancer therapeutics in the United States. Market cap of $1.03B. In Sep 2010: Reported EPS at -0.19 vs. estimate at -0.23 (surprise of 17.4%). In Dec 2010: Reported EPS at -0.21 vs. estimate at -0.22 (surprise of 4.5%). In Mar 2011: Reported EPS at -0.22 vs. estimate at -0.23 (surprise of 4.3%). In Jun 2011: Reported -0.23 vs. estimate at -0.24 (surprise of 4.2%). [Average earnings surprise at 7.6%]. The stock is a short squeeze candidate, with a short float at 8.32% (equivalent to 7.3 days of average volume). The stock has had a couple of great days, gaining 25.7% over the last week.

*EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 6 Biotech Stocks With A History Of Earnings Surprises