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Mallinckrodt (MNK) Tops Q3 Earnings on Solid Sales Growth

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Mallinckrodt plc MNK reported adjusted earnings of $2.20 per share in the third quarter of fiscal 2016 (ended Jun 24, 2016), beating the Zacks Consensus Estimate of $2.01. Earnings were also up from the year-ago figure of $2.02.

Net sales in the quarter came in at $970.6 million, up 10.6% year over year and above the Zacks Consensus Estimate of $928.9 million.

Quarter in Detail

The company reports results under three segments – Specialty Brands, Specialty Generics and Nuclear Imaging.

Sales at the Specialty Brands segment were $589.3 million, up 32.1% from the year-ago quarter. Acthar sales came in at $298.3 million, up 11%. Ofirmev sales increased 13.8% year over year to $70.7 million. Inomax, the company’s second-largest product, generated sales of $121.1 million, up 48.6%.

Specialty Generics recorded sales of $263.4 million, down 14.5% due to lower performance of various product categories as stiff competition hurt both volume and price.

Sales at the Nuclear Imaging segment were $104 million, compared with $108.8 million in the year-ago quarter.

Research and development expenses increased to $76.1 million from $59.9 million a year ago. Selling, general and administrative expenses were $248.4 million, down 15.8%.

During the quarter, the company repurchased 1.7 million shares for $100.3 million under its share repurchase program and repaid $150.0 million of its revolving credit facility.

MALLINCKRODT PL Price and EPS Surprise


Updates Guidance

The company expects earnings to come in above the high end of the range projected earlier- $8.15 – $8.50 for fiscal 2016 (ending September 30, 2016). In May 2016, Mallinckrodt announced that its board of directors has approved a change in the company's fiscal year end to the last Friday in December from the last Friday in September. This decision will result in a transition period from Oct 1 to Dec 30, 2016. For 2016, Mallinckrodt expects earnings in the range of $8.50 to $8.80 per share.

Our Take

Mallinckrodt’s third-quarter fiscal 2016 results were impressive, with the company beating both top- and bottom-line estimates on the back of a solid performance at the Specialty Brands segment, which offset the declines at Specialty Generics and Nuclear Imaging. The company’s acquire-to-invest policy is apparently paying off as both Inomax and Therakos witnessed solid demand, along with incremental volume growth in Ofirmev. Acthar also reported robust volumes, thereby boosting sales. The recent acquisitions should provide further accretion to the bottom line in fiscal 2016.

Mallinckrodt currently carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the health care sector include Mylan N.V. , Impax Laboratories Inc. IPXL and Supernus Pharmaceuticals, Inc. SUPN. All three stocks carry the same rank as Mallinckrodt.

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