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Bausch (BHC) Q4 Earnings Beat Estimates, Revenues Down Y/Y

Zacks Equity Research

Bausch Health Companies Inc. BHC reported better-than-expected results for the fourth quarter of 2018. The company’s adjusted earnings per share of $1.05 beat the Zacks Consensus Estimate of $0.88 but was down from $1.98 reported in the year-ago quarter.

Total revenues of $2.12 billion also exceeded the Zacks Consensus Estimate of $2.09, but was down 2% from the year-ago quarter’s figure.

Quarter in Detail

Revenues in the Bausch + Lomb / International segment were $1.2 billion, approximately flat with the year-ago quarter’s figure, primarily due to divestitures and discontinuations. Excluding the impact of discontinuations and divestitures, the Bausch + Lomb/International segment organically improved approximately 5%. The increase was primarily due to higher volumes despite a planned channel inventory reduction of $10 million in the Global Ophtho Rx business.

Salix segment revenues came in at $426 million, roughly flat year over year as 12% growth in Xifaxan was offset by a planned channel inventory reduction of $47 million and generic competition following the loss of exclusivity for Uceris.

Ortho Dermatologics segment revenues were $165 million, down 2% year over year due to lower volumes. This was partially offset by 32% revenue growth in the Global Solta business. 

Diversified Products segment revenues were $325 million, down 11% from the year-ago quarter, primarily due to the impact of divestitures and discontinuations.

2018 Results

Revenues came in at $8.4 million, which was down 4% from 2017 but surpassed the Zacks Consensus Estimate of $8.34 billion. Earnings of $4.01 also beat the Zacks Consensus Estimate of $3.81.

2019 Guidance

Revenues are expected between $8.30 billion and $8.50 billion. The Zacks Consensus Estimate is $8.51 billion.

Our Take

Bausch’s performance in the fourth quarter was encouraging. After a tumultuous period, Bausch started a rebuilding process. The company also changed its name. Even though it is still early to comment on the rebuilding process, Bausch’s efforts to sell non-core assets and pay down huge levels of debt are commendable. The company recorded 1% organic growth in 2018 and reduced debt by more than $1 billion. Bausch repaid $400 million of debt in the fourth quarter of 2018.

The Bausch + Lomb/International segment registered 4% organic growth in 2018, driven by volume growth across all segments. The company recently announced that a subsidiary of Bausch Health acquired the U.S. rights to Eton Pharmaceuticals' ETON EM-100, an experimental eye drop. EM-100 has been submitted to the FDA for review. Upon approval, the eye drop will be the first over-the-counter (OTC) preservative-free formulation eye drop for the treatment of ocular itching associated with allergic conjunctivitis.

Bausch’s stock has gained 32.8% in the year so far compared with growth of 10.2% for the industry.

 

Bausch's Salix business continues to drive growth and contribute to the top line. In particular, increased sales of Xiaflex and Relistor are boosting the segment.  However, the dermatology market is challenging.

While the guidance for 2019 wasn’t that impressive, we do expect momentum to pick up. Bausch has narrowed focus on seven recently launched or expected to be launched products pending completion of testing and receipt of FDA approval. The company launched 10 key products during 2018, including two copromotions. Four of the Significant Seven products were launched during 2018 and the company expects a decision from the FDA on Duobrii shortly.

Zacks Rank & Stocks to Consider

Bausch currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the healthcare sector include Bristol-Myers Squibb Company BMY and GlaxoSmithKline plc GSK, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bristol-Myers’ earnings per share estimates have increased from $4.07 to $4.16 for 2019 in the past 60 days.

GlaxoSmithKline’s earnings per share estimates have increased from $2.86 to $2.95 for 2019 in the past 60 days.

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