Amgen: Earnings Preview

| About: Amgen Inc. (AMGN)

Biotechnology giant Amgen Inc. (NASDAQ:AMGN) is scheduled to release its first quarter 2012 results on April 24, 2012. The Zacks Consensus Earnings Estimate for the first quarter is $1.43 per share (with a downside risk of 1.40%) on revenues of $3.94 billion. In the year-ago quarter, Amgen recorded earnings per share of $1.32, while sales came in at $3.7 billion.

Fourth Quarter Recap

Amgen reported fourth quarter earnings per share of $1.19, 5 cents below the Zacks Consensus Estimate. Earnings, however, increased 3.5% from the year-ago period. A lower tax rate, lower share count and higher revenues contributed to the year-over-year increase in earnings.

Total revenue increased 3% to $3,973 million in the fourth quarter of 2011. Revenues also missed the Zacks Consensus Estimate of $3.89 billion.

Full year 2011 earnings came in at $5.26 per share, 2.7% above the year-ago period but 3 cents below the Zacks Consensus Estimate. Revenues increased 4% from the year-ago period to $15.58 billion in 2011. Full year revenues were just above the Zacks Consensus Estimate of $15.50 billion. (Read our full coverage of the earnings report at Amgen Misses; 2012 Outlook Strong ).

Agreement of Analysts

Estimate revisions for Amgen have been scarce over the last 30 days. Only 1 analyst has revised earnings estimate for the Thousand Oak, California-based company, over the last 30 days. The revision has been in the upward direction. The lack of estimate revisions is prevalent even for fiscal 2012. The last 30 days has seen 2 analysts revising earnings estimates. Movements have been witnessed in both directions. We believe that most analysts are remaining on the sidelines prior to the earnings release and will adjust their estimates only after Amgen discloses its results.

Magnitude of Estimate Revisions

Estimates for the first quarter of 2012 have remained static at $1.43 over the last 30 days due to a lack of significant estimate revisions by the analysts following the stock. Estimates for fiscal 2012 have gone up by only a penny to $5.94 per share due to lack of significant estimate revisions.

Surprise History

Amgen exhibited a positive earnings surprise trend in three of the last four quarters. The company missed estimates in the final quarter of 2011 recording a negative surprise of 4.03% in the quarter. The maximum positive surprise of 9.52% was witnessed in the third quarter of 2011. On an average, the earnings surprise was 2.92%.

Neutral on Amgen

We currently have a Neutral recommendation on Amgen, which carries a Zacks #2 Rank (short-term Buy rating). With several key products expected to lose patent protection in the next few years, Amgen is looking to strengthen its product portfolio by inking deals/making acquisitions.

The current month alone has seen Amgen inking two deals. Amgen inked a deal with AstraZeneca (NYSE:AZN) for the joint development and commercialization of five monoclonal antibodies in Amgen's pipeline. Also in April 2012, Amgen announced its intention to acquire privately-held KAI Pharmaceuticals. Earlier this year, Amgen acquired biotech company, Micromet, Inc.

Furthermore, the successful commercialization of Prolia/Xgeva and its potential approval for additional indications are important events for Amgen. While we are bullish on Prolia/Xgeva, any hiccup, either with respect to delays in gaining approval for additional indications, a miss in any of the ongoing phase III programs, delays in the reimbursement coverage process or safety concerns post-launch, will weigh heavily on the shares.