Celgene: Earnings Preview

| About: Celgene Corporation (CELG)

Celgene Corporation (NASDAQ:CELG) is set to unveil its first quarter 2012 results on April 26, 2012 before the start of trading. The Zacks Consensus Estimate for the first quarter is $1.02 (year-over-year increase of 43.7%) on revenues of $1,316 million (year-over-year increase of 17%).

Fourth Quarter Recap

Celgene's fourth quarter 2011 earnings (excluding special items but including stock-based compensation expense) of 93 cents per share was below the Zacks Consensus Estimate by 2 cents but above the year-ago earnings by 31 cents. Total revenue climbed approximately 20% to $1.28 billion in the final quarter of 2011.

Agreement of Estimate Revisions

Over the past thirty days, 2 of the 6 analysts covering Celgene for the first quarter of 2012 have revised their earnings estimates upwards with no downward movement. Earnings estimates for fiscal 2012 too have a slight upward bias, with 2 analysts upping estimates and 1 moving in the opposite direction over the last 30 days.

We believe that the upward bias is due to the bright long-term prospects of the stock. The company boasts of a strong oncology portfolio. Growth is expected to be driven by cancer drugs such as Revlimid, Vidaza, Abraxane and Istodax.

We are impressed by Celgene's financial flexibility and strong balance sheet. Celgene remains in excellent financial health, with $2.65 billion in cash on hand at the end of 2011 and with a debt-to-capitalization ratio of around 24%. The strong financial position should aid Celgene's pipeline development efforts apart from enabling it to make acquisitions/sign deals to drive growth.

Magnitude of Revisions

Earnings estimates for the first quarter of 2012 have gone up by only a cent to $1.02 per share over the last 30 days due to the lack of significant estimate revisions by the analysts following the stock. Fiscal 2012 estimates have increased by a penny to $4.32 over the last 30 days.

Our Recommendation

We have a Neutral recommendation on Celgene. Despite the narrow miss in the final quarter of 2011, we believe that Celgene, driven by its impressive oncology portfolio, expansion efforts, strong balance sheet and robust pipeline, will perform well in the coming quarters. The stock carries a Zacks #3 Rank (Hold rating) carried by the stock in the short run.

April 26 is expected to be a busy day on the earnings front in the pharmaceutical sector. Apart from Celgene, other big players in the sector, such as Bristol-Myers Squibb Company (NYSE:BMY), Mylan Inc. (NASDAQ:MYL) and Gilead Sciences Inc. (NASDAQ:GILD) are scheduled to report earnings on the same day.