The Rest Of The Disappointing Story

We're in the thick of earnings season now, and so far it's been a pretty typical one. Roughly two-thirds of companies have topped estimates, while about 20% have fallen short of forecasts. A couple of those misses, however, merit a much closer look.

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Putting Gilead In Perspective

It's no secret that Gilead Sciences (Nasdaq: GILD) shares were duly punished for last quarter's earnings miss. The market wanted a profit of 87 cents per share, but the biotech company only posted income of 85 cents per share. You may even know why the company fell short - its HIV drugs Truvada and Atripia didn't live up to their revenue expectations for the quarter. Thus, GILD got dunked, as investors feared more of the same weak pricing power on the HIV front (especially in Europe).

What most investors may not know, however, is the actual impact those two drugs have on Gilead's top and bottom lines.

The cut-and-dried numbers may surprise you. Truvada sales rang in at $641.7 million, while Atripia revenue totaled $715.8 million, though it shares Atripia revenue with Bristol-Myers Squibb (NYSE: BMY), so we don't know the exact benefit that drug provides for Gilead. And Gilead's total sales for the quarter? They came in at $1.93 billion.

Translation:

Those two HIV drugs alone make up anywhere from 50-70% of the company's total revenue base; investors were right to be nervous.

In fact, they may not be nervous enough, considering GlaxoSmithKline (NYSE: GSK) poses a real threat to Gilead with its HIV treatment now entering Phase III trials. That drug wouldn't be marketable until 2013 at the earliest, but it's not like Gilead's got anything new and earth-shattering in the pipeline - just revised versions of Atripia.

Bottom line: Gilead may be losing its heavy growth firepower.

Ruff Quarter

The 4% decline in revenue, or even the 11% drop in Q1 earnings, really shouldn't be interpreted as a catastrophe for PetMed Express (Nasdaq: PETS). The pet-medicine supplier raked in a profit of only 32 cents per share, versus last year's 36 cents, and was shy of the forecasted 38 cents. No big deal.

What's so interesting here is something CEO Menderes Akdag said of the quarter - something that makes me wonder if it's a signal to the end of pet-mania. As he put it, "Shoppers reluctant to spend freely are focusing on discounts and cutting back on pet medications."

While I know we're still sitting in a pool of economic uncertainty, there's less uncertainty now than there was in 2008 and 2009. Yet total pet-industry sales were higher in both years. Yes, consumers are still feeling the pinch, but there's at least a light at the end of the tunnel now. Perhaps Fido and Fluffy are coming down a couple of pegs on a more permanent basis. Plant that bigger-picture seed in the back of your head as we work through the rest of the pet-related earnings news. (For related reading, see The Economics Of Pet Ownership.)

Is Pet-Mania Winding Down?

PetSmart (Nasdaq: PETM) will report its latest quarter's numbers in the middle of August. Analysts are expecting earnings of 36 cents per share on slightly higher sales. The company earned 31 cents per share for the same quarter a year ago. If either falls short - or if the company expresses concern about the future - you can add that to the growing list of clues that pet-mania is winding down.

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