OPKO Health, Inc. OPK continues to benefit from lucrative RAYALDEE and BioReference platforms, solid focus on research and development (R&D), and optimistic outlook for fourth-quarter 2019. However, operating losses remain a concern.
Shares of OPKO Health have lost 58.8% against the industry’s growth of 8.4% in a year’s time. Meanwhile, the S&P 500 Index rallied 17.4% in the same timeframe.
The company, with a market capitalization of $965.1 million, engages in the diagnostics and pharmaceuticals business in the United States, Ireland, Chile, Spain, Israel and Mexico. It anticipates earnings to improve 42.9% in the next quarter.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
OPKO Health has an infamous record of incurring huge operating losses. To date, the company has generated limited revenues from pharmaceutical operations in the United States, Chile, Mexico, Israel, Spain and Ireland.
In third-quarter 2019, OPKO Health incurred an operating loss of $39 million. For the fourth quarter, the company projects operating loss between $42 million and $69 million (including $25 million of non-cash, depreciation and amortization).
What’s Favoring the Stock?
Lucrative prospects in RAYALDEE and BioReference platforms have been providing a competitive edge to OPKO Health in the MedTech Industry. RAYALDEE has been witnessing decent momentum, courtesy of successful efforts from the sales team.
The company expects the BioReference R&D pipeline to increase throughout 2019, backed by improving cash flows from Bio-Reference and RAYALDEE.
OPKO Health’s focus on R&D is a positive factor. The company’s strong commitment toward innovation led to product introductions, improvement in existing products, and product-line expansion. Moreover, its commitment resulted in the enhancement of R&D facilities and procurement of new equipment for the same.
Per management, the company will continue to make solid investments in R&D programs throughout 2019. OPKO Health projects R&D expenses of $28-$31 million for the fourth quarter.
Strong outlook for fourth-quarter 2019 instills optimism in the stock. Management anticipates fourth-quarter revenues from Services between $165 million and $175 million (excluding revenues from 4kscore from Medicare beneficiaries). The company expects Product revenues of $25-$29 million, including $8-$9 million revenues from RAYALDEE.
Which Way Are Estimates Headed?
For 2019, the Zacks Consensus Estimate for revenues is pegged at $894.4 million. The same for earnings stands at a loss of 43 cents per share.
Stocks to Consider
Some better-ranked stocks in the broader medical space are Cerner Corporation CERN, HealthEquity, Inc. HQY and Chegg, Inc. CHGG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cerner’s long-term earnings growth rate is estimated at 13.6%.
HealthEquity’s long-term earnings growth rate is pegged at 25%.
Chegg’s long-term earnings growth rate is estimated at 30%.
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