A month has gone by since the last earnings report for Valeant Pharmaceuticals International, Inc. . Shares have lost about 17.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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 drivers.
Valeant Tops Q4 Earnings, Shares Down on Tepid View
The company’s adjusted earnings per share of $1.26 beat the Zacks Consensus Estimate of $1.24. Earnings, however, declined 18.7% year over year on lower product sales.
Total revenue came in at $2.40 billion, beating the Zacks Consensus Estimate of $2.35 billion but declining 13% from the year-ago quarter. The year-over-year decline was owing to a fall in overall product sales in its existing business and negative impact from currency as well as divestitures. Moreover, a decline in pricing also impacted the top line. However, acquisitions completed in 2015 provided some top-line support.
Quarter in Detail
Revenues in the Bausch + Lomb / International segment was $1.16 billion, down 0.9% year over year as incremental revenue gains and slight volume increases from the consumer business in the U.S. and Asia Pacific region were offset by declines in other business units within the segment along with the negative impact of foreign exchange.
Revenues in the Branded Rx segment were $829 million, almost 17.3% decline from $1.0 billion in the year-ago quarter mainly due to due to fall in the Salix and Dermatology business. The GI business was down 17% year over year due to the loss of exclusivity with Glumetza and Zegerid, and the transfer of the Zegerid authorized generic out of the GI business to the diversified segment.
Revenues in the U.S. Diversified Products segment were $398 million, a decline of 31.1% year over year due to lower volumes in neurology which fell 35%. Decreases in realized prices across the neuro portfolio reduced revenue by approximately 15%, and the remaining roughly 20% decline came from lower volumes. Pricing in the neurology business declined due to increased managed care rebates, lower price appreciation credits relative to the prior year, and higher group purchasing discounts provided for products including Isuprel and Nitropress.
Research and development expenses were $93 million in the reported quarter, down 2.1% from the year-ago quarter.
Selling, General and Administrative costs were $658 million compared with $682 million in the year-ago quarter, declining almost 3.5% year over year.
2016 Results
Revenues came in at $9.6 billion, down from $10.5 billion in 2015 but roughly in line with the Zacks Consensus Estimate. Earnings of $5.47 were down from $8.14 in 2015 but in line with the Zacks Consensus Estimate.
2017 Guidance
The company expects total revenue in the range of $8.90 billion–$9.10 billion while the Zacks Consensus Estimate is pegged at $8.97 billion.
During the quarter, the company entered into agreements to divest a number of assets, including CeraVe, AcneFree, and Ambi to L'Oreal for $1.3 billion, Dendreon to Sanpower Group for $819.9 million and other non-core international businesses (Vietnam, Indonesia, and Brazil). The company plans to use the proceeds from the divestiture to pay down its high levels of debt.
On a positive note, the FDA approved its new psoriasis treatment, Siliq. The company also resubmitted its glaucoma treatment, Vyzulta (latanoprostene bunod) in Feb 2017. Meanwhile, the company completed two successful phase III studies on IDP-118, a topical psoriasis treatment. The company recruited and launched a new primary care sales force for Xifaxan. The company also licensed EGP-437 from EyeGate Pharmaceuticals for a new eye care indication.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been three downward revisions for the current quarter. In the past month, the consensus estimate also shifted downward by 19.9% due to these changes.
VGM Scores
At this time, Valeant's stock has a subpar Growth Score of 'D', though it is lagging a lot on the momentum front with an 'F'. 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are looking for a below average return from the stock in the next few months.
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Why Is Valeant (VRX) Down 17.7% Since the Last Earnings Report?
A month has gone by since the last earnings report for Valeant Pharmaceuticals International, Inc. . Shares have lost about 17.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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 drivers.
Valeant Tops Q4 Earnings, Shares Down on Tepid View
The company’s adjusted earnings per share of $1.26 beat the Zacks Consensus Estimate of $1.24. Earnings, however, declined 18.7% year over year on lower product sales.
Total revenue came in at $2.40 billion, beating the Zacks Consensus Estimate of $2.35 billion but declining 13% from the year-ago quarter. The year-over-year decline was owing to a fall in overall product sales in its existing business and negative impact from currency as well as divestitures. Moreover, a decline in pricing also impacted the top line. However, acquisitions completed in 2015 provided some top-line support.
Quarter in Detail
Revenues in the Bausch + Lomb / International segment was $1.16 billion, down 0.9% year over year as incremental revenue gains and slight volume increases from the consumer business in the U.S. and Asia Pacific region were offset by declines in other business units within the segment along with the negative impact of foreign exchange.
Revenues in the Branded Rx segment were $829 million, almost 17.3% decline from $1.0 billion in the year-ago quarter mainly due to due to fall in the Salix and Dermatology business. The GI business was down 17% year over year due to the loss of exclusivity with Glumetza and Zegerid, and the transfer of the Zegerid authorized generic out of the GI business to the diversified segment.
Revenues in the U.S. Diversified Products segment were $398 million, a decline of 31.1% year over year due to lower volumes in neurology which fell 35%. Decreases in realized prices across the neuro portfolio reduced revenue by approximately 15%, and the remaining roughly 20% decline came from lower volumes. Pricing in the neurology business declined due to increased managed care rebates, lower price appreciation credits relative to the prior year, and higher group purchasing discounts provided for products including Isuprel and Nitropress.
Research and development expenses were $93 million in the reported quarter, down 2.1% from the year-ago quarter.
Selling, General and Administrative costs were $658 million compared with $682 million in the year-ago quarter, declining almost 3.5% year over year.
2016 Results
Revenues came in at $9.6 billion, down from $10.5 billion in 2015 but roughly in line with the Zacks Consensus Estimate. Earnings of $5.47 were down from $8.14 in 2015 but in line with the Zacks Consensus Estimate.
2017 Guidance
The company expects total revenue in the range of $8.90 billion–$9.10 billion while the Zacks Consensus Estimate is pegged at $8.97 billion.
During the quarter, the company entered into agreements to divest a number of assets, including CeraVe, AcneFree, and Ambi to L'Oreal for $1.3 billion, Dendreon to Sanpower Group for $819.9 million and other non-core international businesses (Vietnam, Indonesia, and Brazil). The company plans to use the proceeds from the divestiture to pay down its high levels of debt.
On a positive note, the FDA approved its new psoriasis treatment, Siliq. The company also resubmitted its glaucoma treatment, Vyzulta (latanoprostene bunod) in Feb 2017. Meanwhile, the company completed two successful phase III studies on IDP-118, a topical psoriasis treatment. The company recruited and launched a new primary care sales force for Xifaxan. The company also licensed EGP-437 from EyeGate Pharmaceuticals for a new eye care indication.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been three downward revisions for the current quarter. In the past month, the consensus estimate also shifted downward by 19.9% due to these changes.
Valeant Pharmaceuticals International, Inc. Price and Consensus
Valeant Pharmaceuticals International, Inc. Price and Consensus | Valeant Pharmaceuticals International, Inc. Quote
VGM Scores
At this time, Valeant's stock has a subpar Growth Score of 'D', though it is lagging a lot on the momentum front with an 'F'. 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are looking for a below average return from the stock in the next few months.