Valeant Pharmaceuticals Intl Inc (NYSE: VRX)
Valeant Pharmaceuticals is having a rough day in the market today, and for a very good reason. As I predicted in a post about VRX yesterday, the company has reported preliminary fourth quarter earnings, missing expectations in a big way. The company also provided relatively weak first quarter guidance. Today, we’ll talk about what we saw from the preliminary earnings release, how the market reacted to the news, and what we can expect to see from VRX moving forward.
Valeant Pharmaceuticals Reports Preliminary Earnings For Q4
As mentioned above, VRX reported preliminary earnings before the opening bell this morning, causing concern among investors. Now, keep in mind that the final numbers aren’t out quite yet, but the preliminary data is proving to be a major cause for concern. Here’s what we saw…
- Earnings Per Share – In terms of earnings per share, analysts expected that the company would produce $2.61 in the quarter. Unfortunately, preliminary data shows a wide miss, with VRX producing earnings in the amount of $2.50 per share for the quarter.
- Revenue – While earnings may have been a missed, when it comes to revenue, we saw relatively positive data. While analysts expected the company to generate $2.75 billion in revenue, it was only able to generate $2.8 billion in revenue for the quarter.
- Guidance – The biggest concern among investors comes from first quarter guidance. In the first quarter, VRX expects that it will generate between $1.30 and $1.55 per share in earnings on total revenue of between $2.3 and $2.4 billion. This is well below previous guidance released in the amount of $2.35 to $2.55 per share on revenue of $2.8 to $3.1 billion.
As you can see from the data above, earnings was a bit of a miss. However, the biggest concerning data was guidance. In a statement following the preliminary earnings release, J. Michael Pearson, CEO at VRX had the following to say…
The Challenges of the past few months are not yet behind us and our goal for 2016 is to better balance our priorities across all of our contituencies – physicians, patients, employees, payors, debt holders and shareholders. I want to again thank all our dedicated employees, as well as the entire management team, for their diligence throughout this difficult time to ensure that the business remains solid. In discussion with the Board, we have assumed lower growth in our U.S. dermatology, gastrointestinal, and woman’s health portfolios, as well as certain geographies like Western Europe, while keeping our expenses largely unchanged. We plan to work hard to improve these metrics by delivering higher revenues and reducing our costs and, if successful, we hope to beat this guidance in the quarters to come. In the meantime, we are comfortable with our current liquidity position and cash flow generation for the rest of the year, and remain well positioned to meet our obligations.”
How The Market Reacted To The News
As investors, we know that the news moves the market. Any time there is negative news with regard to a publicly traded company, we can expect to see declines. These declines are generally exacerbated surrounding negative earnings. So naturally, following the earnings release, VRX is down in a big way today. Currently (12:13), VRX is trading at $35.67 per share after a loss of $33.37 per share or 48.33% thus far today.
What We Can Expect To See Moving Forward
Moving forward, I have a relatively mixed opinion of what we can expect to see from VRX. In the short run, I’m expecting to see further declines as I predicted in the post mentioned above. However, in the long term, I find Valeant to be an incredibly impressive stock, and thanks to the declines that are going on and to come, it’s possible to get in at an incredibly low price. I understand concerns with regard to prescription numbers after Philidor. However, VRX has already made up for quite a bit of the losses with Walgreens. All in all, things don’t look good for the next six months or so, but VRX didn’t become the massive company it is today by folding under pressure. All in all, things look great for the long run and the short term declines present a great entry point.
What Do You Think?
Where do you think VRX is headed moving forward and why? Let us know your opinion in the comments below!