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What's in the Cards for Bausch Health (BHC) in Q2 Earnings?

Zacks Equity Research

Bausch Health Companies Inc. BHC is scheduled to report second-quarter 2019 results on Aug 6, before market open.

In the last reported quarter, the company’s earnings beat estimates by 15.73%. Bausch’s earnings track record has been excellent so far. The company beat earnings expectations in the last four quarters, the average surprise being 20.51%.

Bausch’s stock has gained 29.1% in the year so far against a 4.1% decline for the industry.

 

 

Factors Likely to Impact Results

Bausch conducts business in four operating segments — the Bausch + Lomb/International segment, the Salix segment, the Ortho Dermatologics segment and the Diversified Products segment.

The company generally earns more than 75% of its total revenues from the Bausch + Lomb/International and the Salix segments. Hence, the focus will be on these two segments in the second quarter.

Revenues marginally missed estimates in the first quarter but new launches are expected to boost performance this time.

Higher volumes boosted the performance of the Bausch + Lomb/International segment in the first quarter and the momentum is likely to continue in the second quarter. The company announced the U.S. launch of Bausch + Lomb ULTRA Multifocal for Astigmatism contact lenses for patients with both astigmatism and presbyopia. In February 2019, it announced that the FDA has 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 Salix business should continue to drive growth in the second quarter. In particular, increased sales of Xifaxan, Apriso and Relistonare must have driven revenues in the second quarter despite the loss of exclusivity of Uceris. Recently-launched Bryhali is also a key catalyst for the company.

In June 2019, Bausch launched psoriasis lotion, Duobrii, in the United States. In April, the FDA approved Duobrii Lotion for the topical treatment of plaque psoriasis in adults. The company recently settled the Xifaxan IP litigation, which should preserve market exclusivity until 2028. The addition of Trulance from the Synergy acquisition has also bolstered the franchise.

Meanwhile, investors are expected to focus on pipeline development, apart from the regular top and bottom-line numbers in the upcoming quarterly results. Bausch has narrowed its focus on seven recently launched or expected to be launched products pending completion of testing and receipt of FDA approval. The products include Vyzulta, Siliq, Bryhali (psoriasis), Lumify, Duobrii, Relistor and SiHy Daily. The company earlier acquired the U.S. rights to Eton Pharmaceuticals’ ETON EM-100, an investigational eye drop, which, 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 focus will also be on the company’s efforts to pay debt, as it had been closely monitored for its huge debt level. Bausch announced clearing an additional $100 million of its senior secured term loans in June 2019, using the cash generated from operations. This led the company to eliminate all mandatory amortization for the first quarter of 2020.

Earnings Whispers

Our proven model does not conclusively predict that Bausch will beat on earnings in the quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Earnings ESP for Bausch is -4.79%. This is because the Zacks Consensus Estimate stands at $1.07 and the Most Accurate Estimate at $1.02. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Bausch carries a Zacks Rank #3, which is favorable. However, the negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Bausch Health Cos Inc. Price, Consensus and EPS Surprise

 

Bausch Health Cos Inc. Price, Consensus and EPS Surprise

Bausch Health Cos Inc. price-consensus-eps-surprise-chart | Bausch Health Cos Inc. Quote

Stocks to Consider

Here are some companies you may consider, as our model shows that these have the right combination of elements to deliver an earnings beat this reporting cycle.

Rigel Pharmaceuticals, Inc. RIGL has an Earnings ESP of +8.77% and a Zacks Rank of 3 at present. The company is scheduled to release second-quarter results on Aug 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jazz Pharmaceuticals, Inc. JAZZ currently has an Earnings ESP of +1.77% and a Zacks Rank #3. The company is scheduled to release second-quarter 2019 results on Aug 6.

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