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United Therapeutics (UTHR) Down 7.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for United Therapeutics (UTHR). Shares have lost about 7.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is United Therapeutics due for a breakout? 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.

United Therapeutics Q4 Earnings & Sales Beat Estimates

United Therapeutics reported adjusted earnings of $3.34 per share for the fourth quarter of 2018, which beat the Zacks Consensus Estimate of $2.54. However, earnings declined 14.1% year over year.

Adjusted earnings excluded the impact of share-based compensation expenses, impairment charge related to investment in a privately-held company, one-time license fee and some other items. Including these items, reported earnings came in at $1.48 per share compared with 43 cents in the year-ago quarter.

Revenues for the reported quarter were $381.4 million, beating the Zacks Consensus Estimate of $357.7 million. Revenues, however, fell 17.9% year over year owing to loss of exclusivity for Adcirca.

The Quarter in Detail

United Therapeutics markets four products for the treatment of PAH – Remodulin, Tyvaso, Adcirca and Orenitram.

Adcirca sales were $41.7 million, down 65% year over year as generic competition resulted in lower volumes in the quarter. Adcirca experienced loss of exclusivity in May this year and a generic formulation was launched by Mylan in August 2018 and by Dr Reddy’s in February 2019. A higher allowance for product returns offset the price increase by Lilly and also hurt Adcirca’s sales.

Orenitram sales amounted to $49.6 million in the reported quarter, up 3.3% year over year due to an increase in the number of patients being treated with the drug and price hikes. Remodulin sales were $159.1 million, down 11.7% year over year owing to lower sales in international markets, which offset higher U.S. sales. Tyvaso sales totaled $106.9 million, up 15.7% year.

Unituxin’s (for the treatment of pediatric patients with high-risk neuroblastoma) sales of $24.1 million were down 3.2% year over year.

Research and development (R&D) expenses escalated 52.9% to $139.9 million mainly on account of up-front payment of $45.0 million made to MannKind related to the acquisition of the latter’s phase III-ready investigational drug-device combination product, Treprostinil Technosphere in October.

General and administrative (G&A) expense rose 13% to $58.1 million due to higher consulting fees while sales and marketing (S&M) expense declined 4.0% to 16.9 million.

2018 Results

Full-year 2018 sales declined 5.7% to $1.63 billion, slightly beating the Zacks Consensus Estimate of $1.60 billion.

Adjusted earnings for 2018 were $15.36 per share, which surpassed the Zacks Consensus Estimate of $15.14. However, earnings declined 7% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 10% due to these changes.

VGM Scores

At this time, United Therapeutics has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

United Therapeutics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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