Why Is Viatris (VTRS) Down 10% Since Last Earnings Report?
A month has gone by since the last earnings report for Viatris (VTRS). Shares have lost about 10% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Viatris 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 catalysts.
Viatris' Q2 Earnings Beat, Revenues Miss Estimates
Viatris reported adjusted earnings of 88 cents per share in the second quarter of 2022, easily beating the Zacks Consensus Estimate of 81 cents. In the year-ago quarter, the company reported earnings of 98 cents.
Total revenues came in at $4.12 billion, down 10% year over year. The top line missed the Zacks Consensus Estimate of $4.13 billion.
The U.S. dollar continued to strengthen across major currencies, impacting the top line.
Quarter in Detail
Revenues include sales and other revenues. Sales of $4.1 billion were down 10% from the year-ago quarter.
The company reports results in four segments — Developed Markets, Emerging Markets, JANZ (Japan, Australia and New Zealand) and Greater China.
Developed market sales came in at $2.48 billion, down 6% from the year-ago quarter.
Sales from Emerging Markets came in at $650.9 million, down 25% year over year.
JANZ generated sales of $427.1million, down 15%.
Sales from Greater China came in at $548.3 million compared with $550.3 million a year ago.
On the basis of product category, Brands performed better than management expectations, driven by products such as EpiPen, Norvasc and Lipitor. It generated revenues of $2.48 billion.
Complex generics and biosimilars grew 7%, driven by the interchangeable Semglee launch in the United States. Revenues from the biosimilars portfolio to be contributed to Biocon Biologics totaled approximately $167 million in the quarter.
Viatris generated $84 million in new product revenues (revenues from products launched in 2022), primarily driven by the launch of interchangeable Semglee in the United States. It is on track to achieve approximately $600 million in new product revenues in 2022.
Adjusted gross margin came in at 58.6% compared with 58.5% in the year-ago quarter.
Other Updates
In February, Viatris announced a definitive agreement with Biocon Biologics Limited whereby it will sell its biosimilars portfolio to the latter. Under the terms of the deal, Viatris will combine its biosimilars portfolio with Biocon Biologics Ltd in exchange for pre-tax consideration of up to $3.335 billion.
Viatris will receive $3 billion in consideration in the form of a $2 billion cash payment and $1 billion of convertible preferred equity at the time of close. Viatris will own a stake of at least 12.9% of Biocon Biologics on a fully diluted basis.
Along with second-quarter results, management stated that its transaction with Biocon Biologics is progressing and is expected to close in the second half of 2022.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Viatris has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Viatris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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