Gilead (GILD) Quarterly Earnings: Buy or Sell Signal?

Gilead Sciences, Inc. (GILD) is scheduled to report its fourth-quarter and full-year results on February 6. Wall Street expects the biotech major to post lower revenue on a year-over-year basis, while its EPS is expected to increase. In this piece, I have discussed why it could be wise to buy the stock now despite the potential decline in revenue.

For the fourth quarter, GILD’s EPS is expected to increase 5.5% year-over-year to $1.76. However, its revenue for the same quarter is expected to decline 3.9% year-over-year to $7.10 billion.

The company reported solid earnings and revenue during the third quarter. GILD’s Chairman and CEO, Daniel O’Day, said, “Gilead has now delivered two years of consistent growth in our base business. In the third quarter, this continued growth was driven by both Virology and Oncology.”

“Our clinical momentum also remains strong, and highlights this quarter included new data on Trodelvy with pembrolizumab in first-line metastatic non-small cell lung cancer. In Virology, we completed enrollment for Phase 3 trials of lenacapavir for HIV prevention and oral obeldesivir for COVID-19. We are looking forward to advancing these and other potential new options for patients over the coming months,” he added.

For the full year, GILD expects total product sales to come between $26.70 billion and $26.90 billion, compared to $26.30 billion and $26.70 billion previously. Its total product sales, excluding Veklury, are estimated to come between $24.80 billion and $25 billion, compared to the previously expected $24.60 billion and $25 billion. The company expects Veklury sales to come in at $1.90 billion, compared to the previous estimate of $1.70 billion.

Additionally, its non-GAAP EPS is expected between $6.65 and $6.85, compared to the previous estimates of $6.45 and $6.80. The company’s current expectation for Acquired IPR&D (In-process research and development) is approximately $350 million.

On October 17, 2023, GILD and Assembly Biosciences, Inc. (ASMB) announced that the companies have entered into a 12-year partnership to advance the research and development of novel antiviral therapies, with an initial focus on Assembly Bio’s established areas of herpesviruses, hepatitis B virus (HBV), and hepatitis D virus (HDV). GILD will provide Assembly Bio with $100 million upfront, including a $15.2 million equity investment.

There will be an impact of approximately $0.05 and $0.07 on its fourth-quarter GAAP and non-GAAP EPS. On December 19, 2023, GILD announced an agreement with Compugen to exclusively license its potential first-in-class, pre-clinical antibody program against IL-18 binding protein, including the COM503 drug candidate. The agreement will have an impact of between $0.03 and $0.05 on its fourth-quarter GAAP and non-GAAP EPS.

Similarly, GILD announced the expansion of its partnership with Arcellx, Inc. ACLX will receive a $200 million equity investment from GILD, which will raise GILD’s ownership in the company to 13%. In addition, GILD will make a non-dilutive cash payment of $85 million. Impact on the fourth quarter GAAP and non-GAAP EPS will be approximately between $0.09 and $0.11.

Over the past six months, GILD’s stock has gained 1.7% to close the last trading session at $76.96.

Here’s what you might want to consider ahead of its upcoming earnings release:

Robust Financials

GILD’s total revenues for the fiscal third quarter ended September 30, 2023, rose marginally year-over-year to $7.05 billion. Its product sales increased marginally over the prior-year quarter to $7 billion. The company’s non-GAAP net income attributable to GILD increased 20.4% year-over-year to $2.88 billion.

Also, its non-GAAP EPS came in at $2.29, representing an increase of 20.5% year-over-year. In addition, its cash and cash equivalents at the end of the period increased 21.4% year-over-year.

Mixed Analyst Estimates

Analysts expect GILD’s EPS and revenue for fiscal 2023 to decline 6.9% and 0.7% year-over-year to $6.76 and $27.08 billion, respectively. On the other hand, its EPS and revenue for fiscal 2024 are expected to increase 6.4% and 2% year-over-year to $7.19 and $27.63 billion, respectively.

Discounted Valuation

In terms of forward non-GAAP P/E, GILD’s 11.39x is 39.2% lower than the 18.74x industry average. Its 8.51x forward EV/EBITDA is 36.1% lower than the 13.31x industry average. Likewise, its 10.45x forward EV/EBIT is 37.5% lower than the 16.72x industry average.

High Profitability

In terms of the trailing-12-month gross profit margin, GILD’s 78.81% is 37.6% higher than the 57.28% industry average. Likewise, its 42.85% trailing-12-month EBITDA margin is 735.4% higher than the industry average of 5.13%. Furthermore, the stock’s 0.44x trailing-12-month asset turnover ratio is 12.4% higher than the industry average of 0.39x.

POWR Ratings Show Promise

GILD has an overall A rating, equating to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. GILD has an A grade for Value, consistent with its discounted valuation.

It has a B grade for Quality, which is in sync with its high profitability.

GILD is ranked #4 out of 349 stocks in the Biotech industry. Click here to access GILD’s Growth, Momentum, Stability, and Sentiment ratings.

Bottom Line

GILD has major plans to become a significant force in the oncology field, with its Trodelvy drug leading the charge. The company has set an ambitious goal of achieving a third of its revenue from oncology products by 2030. Its cell therapies, Yescarta and Tecartus, are also expected to keep boosting its topline.

Meanwhile, its HIV sales continue to impress, with Biktarvy and Descovy seeing robust demand. Biktarvy is expected to grow strongly in the fast-growing infectious disease market.

Considering these factors and given its robust financials, discounted valuation, and high profitability, it could be wise to buy the stock now.

How Does Gilead Sciences, Inc. (GILD) Stack Up Against Its Peers?

While GILD has an overall grade of A, equating to a Strong Buy rating, you may also check out these other A (Strong Buy) or B (Buy)-rated stocks within the Biotech industry: Incyte Corporation (INCY), Otsuka Holdings Co., Ltd. (OTSKY), and United Therapeutics Corporation (UTHR). To explore more Biotech stocks, click here.

What To Do Next?

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GILD shares fell $0.32 (-0.42%) in premarket trading Monday. Year-to-date, GILD has declined -5.39%, versus a 3.75% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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