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Mylan (MYL) Up 8.6% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Mylan (MYL). Shares have added about 8.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mylan due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Mylan Q4 Earnings & Revenues Miss Estimates

Mylan reported lower-than-expected results for the fourth quarter and issued a tepid 2019 guidance.

Adjusted earnings of $1.30 per share missed the Zacks Consensus Estimate of $1.33 and declined from $1.43 in the year-ago quarter.

However, fourth-quarter revenues of $3.08 billion missed the Zacks Consensus Estimate of $3.12 billion and declined 4.9% from the prior-year quarter.

Quarter in Detail

The company posts results in three segments on a geographic basis, namely North America, Europe and Rest of World.

North America segment’s net sales came in at $1.10 billion, down 16%. This decline was primarily attributable to lower volumes on existing products due to actions associated with the restructuring and remediation activities at the Morgantown plant, the timing of purchases of products by customers and the impact of the implementation of new accounting standards.

The FDA completed an inspection at Mylan's plant in Morgantown, WV, in 2018 and made observations through a Form 483. Thereafter, Mylan submitted a comprehensive response to the FDA. During the second quarter of 2018, Mylan started a restructuring and remediation program to reduce complexity at the Morgantown manufacturing facility, which led to the discontinuation and transfer of a number of products to other manufacturing sites, a reduction in workforce and extensive remediation activities.

These actions have led to a temporary disruption in supply of certain products. In the fourth quarter, the company received a warning letter related to the previously disclosed observations.

Net sales in the Europe segment were $1.09 billion, up $15.8 million, which was primarily driven by new product sales and higher volumes on existing products.

Rest of World segment’s net sales of $851.4 million were up 4%, driven by new products.

Adjusted gross margin of 54.6% was slightly down from 55.5% in the year-ago quarter.

2018 Results

Earnings per share of $4.58 were up from $4.56 in 2017 but missed the Zacks Consensus Estimate of $4.63. Revenues were $11.43 billion, down 4% from 2017 and missed the Zacks Consensus Estimate of $11.46 billion.

2019 Guidance

Revenues are projected between $11.5 billion and $12.5 billion, with a midpoint of $12 billion that is above the Zacks Consensus Estimate of $11.89 billion.

The company anticipates adjusted EPS around $3.80-$4.80, lower than the Zacks Consensus Estimate of $4.99.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -18.92% due to these changes.

VGM Scores

At this time, Mylan has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Mylan has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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