A month has gone by since the last earnings report for Bausch Health (BHC Quick QuoteBHC - Free Report) . Shares have lost about 15.6% in that time frame, underperforming the S&P 500.

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

Bausch's Q3 Earnings Beat Estimates, Revenues Miss

The company’s third-quarter adjusted earnings per share of $1.14 beat the Zacks Consensus Estimate of $1.07 but decreased from $1.31 reported in the year-ago quarter.

Total revenues of $2.1 billion missed the Zacks Consensus Estimate by 1.95% and fell 1% year over year. Excluding the favorable impact of foreign exchange of $19 million and the impact of divestitures and discontinuations of $46 million, revenues were flat organically year over year.

Quarter in Detail

Revenues from the Bausch + Lomb segment were $949 million, up 4% year over year. Excluding the favorable impact of $10 million from foreign exchange and the impact of divestitures and discontinuations of $4 million, revenues increased 3% organically, primarily due to higher sales resulting from the positive impacts of recovery from the COVID-19 pandemic.

Bausch Pharma (comprising Salix, International, Ortho Dermatologics, and Diversified Products) revenues were $1.16 billion, down 5% year over year. Salix segment revenues came in at $527 million, up 6%. Xifaxan sales increased 12%.

International Rx segment revenues in the quarter were $271 million, down 12%.
Ortho Dermatologics segment revenues were $140 million in the quarter under review, down 2% year over year.

Diversified Products segment revenues were $224 million, down 19% from the year-ago quarter, primarily due to a decrease in volumes and net realized pricing.

During the third quarter, the company repaid debt by approximately $1.1 billion.

2021 Guidance Reiterated

Revenues are projected in the $8.40-$8.60 billion range.

Initial Public Offering of Solta Medical

On the last call, Bausch announced that it plans to pursue an initial public offering (IPO) of its Solta Medical business. Solta is a leading global provider in medical aesthetics with innovative and effective skin rejuvenation and body contouring solutions. The company expects to launch the proposed IPO of its Solta in December 2021 or January 2022. It also expects to launch the Bausch + Lomb IPO approximately 30 days later.

Pipeline Progress

Bausch announced statistically significant top-line results from the second phase III study evaluating the investigational drug NOV03 (perfluorohexyloctane) as a first-in-class eye drop with a novel mechanism of action to treat the signs and symptoms of dry eye disease associated with Meibomian gland dysfunction. The company expects to file an NDA with the FDA in the first half of 2022.

The company also completed the divestiture of Amoun Pharmaceutical Company S.A.E.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -7.63% due to these changes.

VGM Scores

At this time, Bausch has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

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