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Why Is Bausch (BHC) Down 4.7% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Bausch Health (BHC). Shares have lost about 4.7% in that time frame, underperforming the S&P 500.

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

Bausch Misses on Q2 Earnings & Sales, Raises View

Bausch’s adjusted earnings per share of $1.03 missed the Zacks Consensus Estimate of $1.06 but increased from 93 cents reported in the year-ago quarter.
Total revenues of $2.152 billion marginally missed the Zacks Consensus Estimate of $2.167 billion but increased 1% year over year.

Quarter in Detail

Revenues in the Bausch + Lomb/International segment were $1.2 billion, almost flat year over year. Excluding the impact of discontinuations and divestitures, the segment organically improved approximately 4%, driven by growth in Global Consumer and Global Vision Care sales.

Despite the loss of exclusivity of Uceris, the Salix segment revenues rose 15.4% year over year to $509 million. The uptick was primarily driven by 21% growth in Xifaxan. The company earlier acquired certain assets of Synergy Pharmaceuticals Inc., including Trulance, which is a treatment for adults with chronic idiopathic constipation and irritable bowel syndrome with constipation (IBS-C). Revenues from Trulance came in at $17 million.

The Ortho Dermatologics segment revenues were $122 million, down 13% year over year due to lower volumes resulting from the loss of exclusivity of Elidel, Zovirax and Solodyn. This was partially offset by revenue growth in the Global Solta business.

Diversified Products segment revenues were $313 million, down 7% from the year-ago quarter primarily due to the loss of exclusivity of certain products.

The company reduced debt by approximately $100 million in the second quarter of 2019.  Year to date, the company reduced debt by $350 million.

Pipeline Update

The company announced the U.S. launch of Bausch + Lomb ULTRA Multifocal for Astigmatism contact lenses for patients with both astigmatism and presbyopia. During the first quarter, the FDA approved Lotemax Sm (loteprednol etabonate ophthalmic gel) 0.38%, a new gel formulation for the treatment of postoperative inflammation and pain following ocular surgery. Lotemax was launched in April.

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.

Earlier, Bausch had acquired the U.S. rights to Eton Pharmaceuticals’ EM-100, an investigational eye drop for the treatment of ocular itching associated with allergic conjunctivitis. However, the FDA issued a complete response letter (“CRL”) to a regulatory application seeking approval for the candidate.

2019 Guidance Updated

For 2019, revenues are now expected between $8.40 billion and $8.60 billion (previous guidance was $8.35-$8.55 billion).
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Bausch has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Bausch has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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