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Bausch's (BHC) Q1 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research

Shares of Bausch Health Companies Inc. BHC were up 8.4% after it raised sales guidance for 2019. However, the company reported mixed results for the first quarter of 2019. The company’s adjusted earnings per share of $1.03 beat the Zacks Consensus Estimate of 89 cents and increased from 90 cents reported in the year-ago quarter.

Total revenues of $2.01 billion marginally missed the Zacks Consensus Estimate of $2.04 billion, but increased 1% year over year.

Quarter in Detail

Revenues in the Bausch + Lomb/International segment were $1.1 billion, up 1% from the year-ago quarter’s figure. Excluding the impact of discontinuations and divestitures, the Bausch + Lomb/International segment organically improved approximately 8%. The increase was primarily due to higher volumes.

Salix segment revenues came in at $445 million, up 5% year over year, driven by 11% growth in Xifaxan despite the loss of exclusivity of Uceris.

Ortho Dermatologics segment revenues were $138 million, down 1% year over year due to lower volumes driven by the loss of exclusivity of Elidel, Zovirax and Solodyn. This was partially offset by 31% revenue growth in the Global Solta business.

Diversified Products segment revenues were $315 million, down 5% from the year-ago quarter, primarily due the loss of exclusivity for few products.

Pipeline Update

During the reported quarter, the FDA approved Lotemax Sm (loteprednol etabonate ophthalmic gel) 0.38%, a new gel formulation for the treatment of postoperative inflammation and pain following ocular surgery. The company acquired the U.S. rights to Eton Pharmaceuticals' ETON EM-100, an investigational eye drop that, if approved, will be the first over-the-counter preservative-free formulation eye drop for the treatment of ocular itching associated with allergic conjunctivitis.

The company acquired certain assets of Synergy Pharmaceuticals Inc., including Trulance, a treatment for adults with chronic idiopathic constipation and irritable bowel syndrome with constipation (IBS-C).

The FDA approved Duobrii Lotion for the topical treatment of plaque psoriasis in adults.

2019 Guidance Updated

Revenues are now expected between $8.35 billion and $8.55 billion (previous guidance: $8.30 – $8.50 billion). The Zacks Consensus Estimate is $8.48 billion, up from the mid-point of $8.45 billion.

Our Take

Although Bausch’s performance in the first quarter was mixed, we are pretty encouraged by the increase in the company’s guidance. Growth in Xifaxan sales, the launch of Bryhali, the successful acquisition of Trulance and the approval of Duobrii should boost performance, going forward.

The company’s stock has rallied 38% in the year so far compared with growth of 7.1% for the industry.

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 repaid $100 million of debt in the first quarter of 2018.

Zacks Rank & Other Stocks to Consider

Bausch currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the healthcare sector include Bristol-Myers Squibb Company BMY and Roche RHHBY, both carrying a Zacks Rank #2. 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 $4.76 to $4.93 for 2020 in the past 60 days.

Roche’s earnings per share estimates have increased from $2.35 to $2.40 for 2019 in the past 60 days.

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