Nivalis Therapeutics, Inc. NVLS is expected to report third-quarter 2015 results on Nov 2. Last quarter, the company had posted a negative earnings surprise of 252.5%. Let’s see how things are shaping up for this announcement.

Factors at Play

With no approved products in its portfolio, Nivalis is not expected to record any revenues in the third quarter as was the case in the previous quarters.

Further, the company’s operating expenses continue to rise, particularly in research and development, as the company is heavily investing in its pipeline.

Meanwhile, Nivalis’ primary candidate, N91115, is being developed for the treatment of cystic fibrosis. The company plans to evaluate the candidate in combination with Vertex Pharmaceuticals Incorporated’s VRTX Orkambi in cystic fibrosis patients who have two copies of the F508del mutation, in the fourth quarter of 2015. Data from the study should mature in the second half of 2016.

Nivalis’ general and administrative expenses, which increased in the last quarter, may go higher in the third quarter. Escalating operating expenses continue to keep Nivalis’s bottom line under pressure.

Earnings Whispers

Our proven model does not conclusively show that Nivalis is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: Earnings ESP for Nivalis is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 39 cents per share.

Zacks Rank: Nivalis carries a Zacks Rank #3 (Hold). Though a favorable Zacks Rank increases the predictive power of the ESP, the company’s 0.00% ESP makes a surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and a Zacks Rank #3. It is expected to release results on Nov 9.

The Earnings ESP for Sarepta Therapeutics, Inc. SRPT is +10.08% and it carries a Zacks Rank #3. The company is slated to report results on Nov 5.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>