The Zacks Analyst Blog Highlights: Fossil, Bristol-Myers Squibb, Gilead Sciences, Actelion and Johnson & Johnson

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Nov 05, 2013, 09:30 ET

CHICAGO, Nov. 5, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Fossil Inc. (Nasdaq:FOSL-Free Report), Bristol-Myers Squibb Company (NYSE:BMY-Free Report), Gilead Sciences, Inc. (Nasdaq:GILD-Free Report), Actelion Ltd. (OTC:ALIOF-Free Report) and Johnson & Johnson (NYSE:JNJ-Free Report).

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Here are highlights from Monday's Analyst Blog:

Can Fossil (FOSL) Surprise This Season?

Fossil Inc. (Nasdaq:FOSL-Free Report) is scheduled to report third quarter 2013 earnings after the market closes on Nov 5, 2013. Last quarter, Fossil posted a positive surprise of 23.6%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Fossil is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.45%. This is meaningful and a leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #3 (Hold): Fossil carries a Zacks Rank #3. Note that stocks with a Zacks Rank #1, #2 and #3 have a significantly higher chance of beating earnings estimates. The Sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

The combination of Fossil's Zacks Rank #3 (Hold) and a positive ESP of +1.45% makes us confident of an earnings beat on Nov 5.

What is Driving the Better-than-Expected Earnings?

We believe that the company's strong watch sales, prudent expense management and its ability to generate positive comparable store sales are expected to drive earnings results in the third quarter.

Fossil has been witnessing double-digit growth in global watch sales after the acquisition of the Skagen brand in Apr, 2012. Following the Skagen launch, the brand boosted the company's watch sales. In Feb 2013, Fossil launched the long-awaited and exclusive collection of watches for men and women by designer Karl Lagerfeld and received good response. During the first quarter of 2013, the company introduced Fossil Swiss watches in Asia. Its Emporio Armani Swiss and Tory Burch lines of watches are slated for a 2014 launch.

Fossil also has a history of delivering positive comparable store sales driven by continued strengthening of the Fossil brand. We remain impressed with the performance of the Fossil brand and continue to expect solid comp growth in the third quarter.

For third-quarter 2013, Fossil expects sales to increase approximately 12.5% to 13.5%. The company expects earnings in the range of $1.30 to $1.37 per share and operating margin in the range of 15.0% to 15.5%.

During its second quarter conference call, Fossil also raised its guidance for earnings, sales and operating margin for full year 2013. The increased guidance reflects continued momentum of the Fossil brand and new product launches in 2013.

Bristol-Myers Seeks Japanese Approval

Bristol-Myers Squibb Company (NYSE:BMY-Free Report) announced that it has submitted a New Drug Application (NDA) to the pharmaceutical and medical devices agency of Japan seeking approval to market its combination therapy of daclatasvir and asunaprevir ( an all-oral, interferon and ribavirin-free regimen) for treating patients suffering from hepatitis C virus (HCV). Bristol-Myers noted that interferon-based therapies are the current standard of care for treating HCV patients. While daclatasvir belongs to a new class of drugs- NS5A inhibitors- asunaprevir is a NS3 protease inhibitor.

Approval was sought on the basis of encouraging data from a phase III study which showed that the combination of daclatasvir and asunaprevir achieved an overall sustained virologic response of 84.7% after 24 weeks of treatment in Japanese patients suffering from genotype 1b version of HCV. The patients were either ineligible for or intolerant to interferon therapy or non-responders to the same.

Bristol-Myers stated in its press release that for the first time an approval has been sought for an interferon-free and ribavirin -free therapy to cure HCV. A 48-week course of both peg-interferon (peg-INF - weekly injections) and ribavirin, are the standard treatment for genotype 1 HCV infection. However, this treatment regimen is associated with significant side-effects like fatigue, flu-like symptoms, etc.

Consequently, the HCV market is highly lucrative across the globe. Bristol-Myers stated that in Japan alone 1.2 million people are estimated to be affected by HCV. The company also said that approximately 70% of the HCV affected population suffers from genotype 1b of the infection.

Many companies are developing all-oral combination therapies targeting the lucrative HCV market. Gilead Sciences, Inc.'s (Nasdaq:GILD-Free Report) sofosbuvir (in combination with ribavirin) is a high-potential candidate (under review) targeting HCV. A decision from the U.S. Food and Drug Administration is expected by Dec 8, 2013. An advisory panel of the FDA recommended the approval of sofosbuvir last month.

Bristol-Myers carries a Zacks Rank #3 (Hold). Actelion Ltd. (OTC:ALIOF-Free Report) appears to be more attractive with a Zacks Rank #1 (Strong Buy). Johnson & Johnson (NYSE:JNJ-Free Report) also appears to be well placed with a Zacks Rank #2 (Buy).

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