Friday, July 29, 2016

Gilead: The Beat Goes On

Summary

Gilead is set to report its fiscal second quarter earnings following close of market on July 25, 2016.

A consensus earnings estimate from 2 analysts reported by Zacks Investment Research calls for quarterly earnings of $3.04.

I expect another in a series of syncopated beats.

Introduction

Gilead (NASDAQ:GILD) is a confounding stock. Of late, it has exasperated shareholders who have been out of synch with its peculiar rhythms. It has enriched those who been have wise enough, wily enough or lucky enough to go with its with its syncopated flow. Which are you? What variety of surprise does Gilead have in store for a hot Monday afternoon in July's final week when its next earnings report greets its eager investors on July 25?

Earnings Beats

Earnings beats are generally anticipated as good news in the investing universe. Gilead has given us plenty of these. In its fiscal year 2015, Gilead's wonder drug Harvoni CURED hundreds of thousands of HCV patients from around the world. These patients were of many nationalities, and many ethnicities.

The mind-boggling success of this therapy ushered in four successive earnings beats in its wake. Gilead's shareholders who anticipated this success, loading up on the stock in its rocket phase from 2012 to 2015 were amply rewarded for their foresight. Those shareholders who bought in during Gilead's jazzy period as Harvoni was proving its therapeutic magic have had mixed results.

The Beat Down (Earnings Beat, Shares Fall).

Several of Gilead's earnings beats have been followed by a Gilead specialty. I refer to this with no little hostility as the "beat down". This occurs when Gilead exceeds earnings expectations, sometimes by preposterous margins and yet the stock still gets spanked over the subsequent weeks. Usually it's a good solid thumping not just isolated whacks.

For example, SA reported Gilead's Q2, 2015 earnings beat of $0.44 on 7/28/2015. The share price response was fitful. Share prices gyrated in small staccato moves with a downward bias. Shares lost over $20 per share from $117.15 on July 24, 2015 to $97.60 on October 15, 2015 (a nearly 20% drop).

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