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Endo International (ENDP) Up 12.4% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Endo International plc . Shares have added about 12.4% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ENDP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Xiaflex & Sterile Injectables Drive Endo's Q1 Earnings

Endo reported first-quarter 2018 results wherein both earnings and revenues surpassed estimates but declined year over year.

Earnings from continuing operations were 67 cents which beat the Zacks Consensus Estimate of 54 cents. However, earnings declined significantly from $1.23 recorded in the year-ago quarter.

Revenues came in at $700.5 million in the quarter, surpassing the Zacks Consensus Estimate of $687 million. However, the top line was down 32% year over year, primarily due to the loss of marketing exclusivity in the first half of 2017 for the first-to-file U.S. Generic Pharmaceuticals products ezetimibe tablets, the generic version of Zetia (ezetimibe tablets) and the generic version of Seroquel XR (quetiapine extended-release, also known as ER, tablets) both of which were launched in fourth-quarter 2016.

Moreover, the product discontinuation in the generic pharmaceuticals segment, pricing pressure from increased competition primarily impacting the generics base business, divestiture of Litha and Somar, as well as the cessation of Opana ER shipments to customers by Sep 1, 2017 accounted for the decline.

Quarterly Highlights

Endo now has four reportable business segments: (1) U.S. Generic Pharmaceuticals, (2) U.S. Branded - Specialty & Established Pharmaceuticals, (3) U.S. Branded - Sterile Injectables and (4) International Pharmaceuticals. U.S. Branded Pharmaceuticals sales were down 20% to $200 million due to cessation of product shipments of Opana ER. Specialty Products revenues increased 7%. However, Xiaflex sales increased 15% year over year reflecting strong volume growth of the product for the indication of both Dupuytren's Contracture and Peyronie's Disease.

During the first quarter, Endo advanced its cellulite treatment development program. Endo initiated two phase III clinical trials of collagenase clostridium histolyticum ("CCH") for the treatment of cellulite. Recruitment for both trials is progressing as expected and top-line results from these trials are expected by the first quarter of 2019.

In December 2016, Endo terminated its worldwide license and development agreement with BioDelivery Sciences International, Inc.  for Belbuca and returned the product.

U.S. Branded - Sterile Injectables sales of $216 million was up 25% driven by strong growth of Adrenalin and Vasostrict. In April, Endo entered into definitive agreements to acquire Somerset Therapeutics, LLC, a specialty pharmaceutical company that develops and markets sterile injectable and ophthalmic drugs for the U.S. marketplace, and the business of its affiliate Wintac Limited, which operates as Somerset Therapeutics' contract developer and manufacturer, for approximately $190 million.

U.S. Generic Pharmaceuticals recorded sales of $249 million in the quarter, down 55% due to the loss of marketing exclusivity for the first-to-file products ezetimibe tablets and quetiapine ER tablets in the first half of 2017. Product discontinuances and pricing pressure from increased competition dampened the generic base business.

The International Pharmaceuticals division garnered sales of $35 million, down from $65 million in the year-ago quarter due to recent divestitures.  Endo sold Mexican subsidiary, Somar, to Advent International in October 2017. Endo also sold its South African subsidiary, Litha Healthcare Group in July 2017.

2018 Outlook Reiterated

Endo expects revenues between $2.6 billion and $2.8 billion in 2018. The company anticipates earnings from continuing operations in the range of $2.15-$2.55 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to seven lower. In the past month, the consensus estimate has shifted downward by 6.5% due to these changes.

Endo International plc Price and Consensus

VGM Scores

At this time, ENDP has a nice Growth Score of B, however its Momentum is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value and momentum investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, ENDP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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