Pfizer Inc. (PFE - Analyst Report) is scheduled to report second-quarter 2016 results on Aug 2, before the opening bell. The company has been seen to consistently beat earnings expectations. The company’s earnings surpassed expectations in each of the last four quarters, with an average positive surprise of 12.80%.

In the last reported quarter, Pfizer posted a positive earnings surprise of 21.82%. Will this pharma giant be able to beat estimates this time around as well? Let's see how things are shaping up for this quarter.

Factors Driving Q2 Results – New Products & More

At the time of announcing first-quarter 2016 results, Pfizer raised both the earnings and revenue outlook for 2016 reflecting strong performance. For 2016, Pfizer expects earnings in the range of $2.38 to $2.48 per share on revenues of $51 billion and $53 billion. Previously, the company guided toward earnings of $2.20–$2.30 per share on revenues of $49 billion–$51 billion in 2016.

While new products like Eliquis, Xalkori, Xeljanz, Ibrance and Prevnar 13 should contribute to the top line meaningfully, the bottom line should be driven by cost savings and share buybacks.

Ibrance has already earned broad patient and physician acceptance with an encouraging feedback while Eliquis continues to perform well due to market penetration and market share gains in the U.S. and Japan. Prevnar 13 uptake continues to be strong among adults reflecting the success of commercial programs, as well as the timing of government purchases for the pediatric indication.

Meanwhile, the Hospira acquisition should be an important growth driver as well with sterile injectables, biosimilars, and infusion system segments performing well. With the integration efforts currently on, Pfizer expects to achieve approximately $1 billion in annual cost savings by 2018, up from an original synergy target of $800 million.

However, Pfizer will continue to face headwinds in the form of genericization and the expiration of a few co-promotion agreements, which will continue to hamper top-line growth. On the first quarter call the company mentioned that it expects the loss of exclusivity impact from Lyrica, Rebif and Enbrel to be more pronounced in the remaining quarters of the year as compared to the first quarter. Moreover, new product launch expenses and R&D investments are also phased higher for the remainder of the year.

On the second-quarter call, investor focus is expected to remain on the company’s performance along with the performance of new products and the company’s pipeline progress including biosimilars and immuno-oncology. The company’s business development plans will be another area of focus as its decision regarding the splitting of its business is expected by year end. We note that Pfizer acquired Anacor for approximately $5.2 billion in Jun 2016.

Why a Likely Positive Surprise?

For the second quarter of 2016, our proven model shows that Pfizer is likely to beat earnings estimates 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 +1.61%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #3 (Hold): Note that stocks with a Zacks Ranks #1 (Strong Buy), #2 (Buy) or #3 have a significantly higher chance of beating earnings. However, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The combination of Pfizer’s Zacks Rank #3 and +1.61% ESP makes us reasonably confident of an earnings beat this season.

PFIZER INC Price and EPS Surprise

PFIZER INC Price and EPS Surprise | PFIZER INC Quote

Other Stocks That Warrant a Look

Pfizer is not the only company looking up this earnings season. Here are some other health care stocks that you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter.

Exelixis, Inc. (EXEL - Analyst Report) has an Earnings ESP of +3.70% and carries a Zacks Rank #3. The company is scheduled to report second-quarter results on Aug 3.

Intercept Pharmaceuticals, Inc. (ICPT - Analyst Report) has an Earnings ESP of +5.05% and carries a Zacks Rank #3. It is scheduled to report second-quarter results on Aug 4.

BioMarin Pharmaceutical Inc. (BMRN - Analyst Report) has an Earnings ESP of +4.00% and carries a Zacks Rank #3. It is also scheduled to report second-quarter results on Aug 4.