CNBC’s Mike Huckman is keeping a close eye on Big Pharma earnings. And he suggests you do the same - because he's spotted a devil the details.
In a Fast Money download he tells the traders, “Eli Lilly kicked off the pure-play Pharma earnings season with a big beat on Monday. Their profits were 21 cents higher than Street estimates. “
But, Huckman suggests there might be more than meets the eye in those numbers. “A lot of the strength came from aggressive cost cuts,” he says.
In fact, cost cutting could well will emerge as a recurring theme throughout the Big Pharma quarterly reports.
“They're all cutting costs on their own or as they merge with each other to position themselves for increasing competition from cheaper generic drugs,” Huckman says.
So when you’re sifting through earnings, make sure to keep an eye out for cost cutting. And you’ll have your work cut out for you. Merck and Schering-Plough , which are about to merge, report earnings Tuesday morning – while Bristol Myers Squibb and Pfizer are out towards the end of the month.
With Big Pharma tightening the belt, is the group cheap? Or will unknowns of healthcare reform keep a lid on stock prices?
What’s the trade?
I’m concerned about all the variables in this space, explains Pete Najarian. But the name to watch is probably Teva. They’re heavily involved in generic drugs and the environment should be good for generics. Also I’m keeping an eye on Amylin .
I think the trade is long Abbott Labs, adds Guy Adami.
My trade is the Pharmaceutical HOLDRs , adds Karen Finerman. I think the valuations are compelling.
I’d look at Amgen, adds Joe Terranova. I just got stopped out of my trade but I think it’s the bottom.
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Trader disclosure: On Apr 20th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;Najarian Owns (CX) Call Spread; Najairan Owns (MCD) And Is Short (MCD) Calls; Najarian Owns (PALM) And Is Short (PALM) Calls; Najarian Owns A (YHOO) Call Spread; Najarian Owns (RF) Call Spread; Najarian Owns (PCU) Call Spread; Najarian Owns (AMLN) Calls; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman Owns (AXP); Finerman's Firm Owns (PBR), (CSCO); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (USO); Finerman's Firm And Finerman Are Short (BAC) And Own (BAC) Preferred Shares; Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares
Terranova Works For (VRTS); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Terranova Owns (MS), (DELL), (IBM), (BP), (DIS), (INTC); Terranova Owns (COP) Calls, (DIS) Calls, (XOM) Calls
Terranova Owns (HES) And Is Short (HES) Calls; Terranova Owns (BRCM) And Is Short (BRCM) Calls; Terranova Owns (IBM) And Is Short (IBM) Calls; Terranova Owns (JOYG) And Is Short (JOYG) Calls; Terranova Owns (JPM) And Is Short (JPM) Calls; Terranova Owns (INTC) And Is Short (INTC) Calls; Terranova Owns (POT) And Is Short (POT) Calls; Terranova Owns (WYNN) And Is Short (WYNN) Calls; Terranova Owns (X) And Is Short (X) Calls; Terranova Owns (XOM) And Is Short (XOM) Calls; Terranova Is Short NYMEX June Crude Oil
Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
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