Biogen Idec (BIIB) Crushes Earnings Estimates, Shares Jump 12%

by Ryan Fitzwater, Director of Research, The Oxford Club
StockGrader

Shares of Biogen Idec (Nasdaq: BIIB) are surging over 12% today after beating Wall Street's expectations on a few fronts.

After yesterday's close, the biotechnology company reported sales of $2.4 billion, a year-over-year increase of 40%, smoking analysts' estimates of $2.2 billion.

The company also outperformed on earnings. For the quarter, Biogen brought in earnings of $3.49 per diluted share, which was more than 23% higher than Wall Street's consensus guess of $2.83.

Biogen's oral multiple sclerosis (MS) drug, Tecfidera, was the main reason for growth. Sales of the drug hit $700 million, a year-over-year increase of 265%. Biogen is hoping to squeeze up to $3.8 billion in annual revenue from Tecfidera, which launched in April 2013.

On top of sales success for the company's newer MS treatment, it also boosted sales in its older injectable MS drug Tysabri. Revenue clocked in at $533 million, a 37.9% bump over the same quarter last year.

With all this good news, it is no surprise that Biogen updated its full-year guidance for 2014. It now expects to see sales growth between 38% and 41%. This is well above previous estimates of 26% to 28%. And Biogen raised its earnings expectations from between $9.85 to $9.95, to $11.26 to $11.46 per share.

Over the last year, Biogen is up over 36%, while the iShares Biotechnology Index (Nasdaq: IBB) is trailing by more than four percentage points.

With all this positive news and today's spike in share price, there's no time like the present to assess Biogen's financial health with our Investment U Fundamental Factor Test:

Earnings-per-Share (EPS) Growth: In the second quarter, Biogen saw a 51.3% increase in EPS year-over-year. Earnings growth of this magnitude is definitely a positive sign.

Price-to-Earnings (P/E): Currently, the biotechnology industry is averaging a P/E ratio of 37.61. With Biogen's recent earnings boost, it currently clocks in with a P/E of 32.66. Almost five points below the competition, this makes the current share price attractive.

Debt-to-Equity Biogen is hitting the mark when it comes to debt load. It has a debt-to-equity ratio of 6.50%, while the industry is averaging 38.20%. Good stuff.

 Free Cash Flow per Share Growth : The only real negative news to pull out of Biogen's recent quarterly report is its drop in free cash flow. It experienced a 64.44% decrease in FCF per share for the quarter. Hopefully the company can improve this the next go-round.

Profit Margins Biogen's peers are sporting profit margins of 6.70%. The company is smoking the competition with profit margins of 29.51%, more than four times higher than the industry average.

 Return on Equity Biogen has beaten the pack once again. Its ROE of 24.50% is almost five times higher than the biotechnology industry average of 5.10%.

*Why did we look at these specific metrics? Find out more here.

Fundamental Factor Test Score

A: Strong Buy (Hits five or more key metrics)

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers over a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth. For more details, click here.

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