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Bear of the Day: Viatris (VTRS)

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Viatris Inc. (VTRS - Free Report) is a classic example of why companies fall to a Zacks Rank #5 (Strong Sell). It disappointed the Street with its full-year guidance and analysts cut full year earnings estimates.

Viatris Inc. was formed in Nov 2020 through the combination of Mylan and Pfizer's Upjohn business. It provides access to medicines, advances sustainable operations and develops innovative solutions.

The global company has a portfolio that comprises more than 1,400 approved molecules across a wide range of therapeutic areas, spanning both non-communicable and infectious diseases, including globally recognized brands, complex generic and branded medicines, a growing portfolio of biosimilars and a variety of over-the-counter consumer products.

Disappointing Full-Year Guidance

On Feb 22, Viatris gave its outlook for the full-year 2021 and announced it would initiate a dividend.

Full-year revenue guidance is expected between $17.2 billion to $17.8 billion, which was lower than the Street expected.

"We are confident that our financial guidance for 2021 is the right starting point for Viatris and continue to expect 2021 to be our trough year in terms of revenue, adjusted EBITDA and free cash flow, reflecting a balanced view of both near-term tailwinds and headwinds, particularly given the delay in closing of the combination between Mylan and Pfizer's Upjohn business," said CEO Michael Goettler.

Analysts Cut Full-Year Earnings Estimates

The analysts were, apparently, too bullish.

7 estimates have been lowered in the last 60 days, pushing the Zacks Consensus down to $3.55 from $4.04 prior to the guidance.

That's the reason that the company has a Zacks Rank of #5 (Strong Sell).

The Zacks Rank is a short-term 1 to 3 month recommendation based on analyst earnings estimate revisions.

All the analysts were in agreement on Viatris and all cut earnings estimates at the same time.

Shares are Dirt Cheap

The shares have fallen 24% over the last 3 months, to new all-time lows, on the news.

The Street is practically giving them away right now.

Viatris trades with a forward P/E of just 3.7 as the Street has low confidence in the company right now until it reports earnings on May 10.

As for the initiation of the dividend, given the timing of the announcement in February, it doesn't expect the board to approve the $0.11 dividend until May, for payment in June 2021.

It will only make 3 quarterly payments in 2021.

Investors considering diving into Viatris may want to wait until its first quarter earnings report for more clarity on the business before doing so.

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