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Why Is Mallinckrodt (MNK) Down 24.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Mallinckrodt (MNK - Free Report) . Shares have lost about 24.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mallinckrodt 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.

Mallinckrodt Beats on Q3 Earnings Estimates, Ups View

Mallinckrodt reported adjusted earnings of $2.10 per share in the third quarter of 2018, up from the year-ago quarter’s $1.82. The bottom line also beat the Zacks Consensus Estimate of $1.80.

Net sales in the quarter came in at $640 million, grew 6.5% year over year and surpassed the Zacks Consensus Estimate of $633 million.

Quarter in Detail

Acthar, Mallinckrodt’s largest product, generated sales of $290.1 million, down 6% due to the residual impact of the previously reported patient withdrawal issues.

Inomax, its second-largest product, generated sales of $133.2 million, up 6%, driven by strong demand. Ofirmev sales increased 15.5% year over year to $87.1 million, owing to strong demand stemming from customers’ focus on non-opioid or multimodal pain management.

Sales of the Therakos immunology platform were $60 million, up 8.5%, driven by increased demand in Europe.

Amitiza sales came in at $48.2 million. The drug was added to Mallinckrodt portfolio as a result of erstwhile Sucampo Pharmaceuticals’ acquisition.

Adjusted selling, general and administrative expenses in the quarter decreased 1.4% to $175.8 million. Meanwhile, research and development expenses increased 67.4% to $78.5 million.

During the quarter, the company reduced total debt by $170.6 million, primarily comprising $150 million in repayments on its revolving credit facility and $15 million decrease in the receivable securitization. The company ended the quarter with net debt less than $6 billion.

2018 Guidance

Propelled by a strong performance in the third quarter of 2018, the company increased its annual guidance. Adjusted diluted earnings per share guidance for fiscal 2018 is expected to be $7.00-$7.20, up from the previous guidance of $6.50-$6.90.

The company did not provide any update on the revenue guidance. Its previous revenue guidance was 4-7% growth.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Mallinckrodt has a poor Growth Score of F, however its Momentum Score is doing a lot 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 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

Mallinckrodt has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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