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Here's Why You Should Retain OPKO Health (OPK) Stock For Now

Zacks Equity Research

OPKO Health, Inc. OPK continues to benefit from RAYALDEE and BioReference platforms, solid R&D focus and optimistic third-quarter 2019 outlook. However, operating losses remain a concern.

The stock carries a Zacks Rank of 3 (Hold).

Price Performance

Shares of OPKO Health have lost 46.2% in a year’s time, compared with the industry’s decline of 5.6%. Meanwhile, the S&P 500 Index has rallied 2.2% in the same time period.

What’s Deterring the Stock?

OPKO Health has an infamous track record of incurring huge operating losses. To date, OPKO Health has generated only limited revenues from the pharmaceutical operations in the United States, Chile, Mexico, Israel, Spain and Ireland.

In the last reported quarter, OPKO Health incurred an operating loss of $47.2 million. For the third quarter, the company projects operating loss in the range of $37-$65 million.

What’s Favoring the Stock?

Lucrative prospects in RAYALDEE and BioReference platforms have been providing OPKO Health a competitive edge in the MedTech Industry. RAYALDEE has been witnessing a decent momentum, courtesy of successful efforts by the sales team.

With respect to BioReference, the company announced that it expects its BioReference R&D pipeline to increase throughout 2019 with improving cash flows from Bio-Reference and RAYALDEE.

OPKO Health’s strong focus in research and development (R&D) is a positive factor. The company’s strong commitment toward innovation led to the introduction of several products, improvements in existing products and expansion of product lines, and enhancements and new equipment in the R&D facilities.

Per management, the company will continue to make solid investments in R&D programs throughout 2019. OPKO Health projects R&D expenses of $32-$36 million for the third quarter.

A strong third-quarter 2019 outlook buoys optimism in the stock. For the third quarter of 2019, management anticipates revenues from Services between $168 million and $178 million. Product revenues are expected within $28-$31 million, including revenues for RAYALDEE in the range of $6.3-$6.8 million.

Which Way Are Estimates Headed?

For 2019, the Zacks Consensus Estimate for revenues is pegged at $893.2 million, indicating a decline of 9.8% from the year-ago period. The same for earnings stands at a loss of 43 cents per share.

Key Picks

Some better-ranked stocks from the broader medical space are Baxter International Inc. BAX, Amedisys, Inc. AMED and CONMED Corporation CNMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Baxter has a long-term earnings growth rate of 12.8%.

Amedisys has a long-term earnings growth rate of 16.3%.

CONMED has a long-term earnings growth rate 14.9%.

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