Why Is Viatris (VTRS) Down 4.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Viatris (VTRS). Shares have lost about 4.8% 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 drivers.
Viatris Q2 Earnings Beat, Generics Business Grows
Viatris delivered adjusted earnings of 75 cents per share in the second quarter of 2023, down from 88 cents in the year-ago quarter but beating the Zacks Consensus Estimate of 71 cents per share.
Total revenues came in at $3.9 billion, down 4.8% year over year. The top line beat the Zacks Consensus Estimate by 0.8%.
Quarter in Detail
Revenues include sales and other revenues. Sales of $3.9 billion were down 5% from the year-ago quarter (3% on an operational basis).
The company reports results in four segments — Developed Markets, Emerging Markets, Japan, Australia and New Zealand (JANZ) and Greater China.
Developed market sales came in at $2.3 billion, down 5% (adjusted for the impact of the biosimilars’ divestiture in November 2022) from the year-ago quarter.
In November 2022, Viatris sold its biosimilars’ portfolio to Biocon Biologics Limited.
Sales from Emerging Markets came in at $648.1 million, flat year over year.
JANZ generated sales of $375.5 million, down 12%.
Sales from Greater China came in at $532.1 million, down 3% year over year.
Revenues from Brands were down 2% year over year to $2.4 billion. Among these, Lipitor’s sales were $380 million, down from $405.6 million in the year-ago quarter. Norvasc sales were $182.4 million, down from $203 million in the year-ago quarter.
Complex generics performed in line with management’s expectations. Revenues from this business declined 61% year over year.
Generics, which include diversified product forms such as extended-release oral solids, injectables, transdermals and topicals, performed ahead of management’s expectations, including solid performance across the broader portfolio in developed and emerging markets. Revenues from this business came in at $1.3 billion, up 5%.
Viatris generated $124 million in new product revenues, primarily driven by the introduction of generic lenalidomide in the United States. It targets to achieve approximately $500 million in new revenues in 2023.
Adjusted gross margin came in at 59.5%, up from 58.6% in the year-ago quarter.
2023 Guidance Reiterated
Revenues are projected between $15.5 billion and $16 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Viatris 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 trending upward 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.
Performance of an Industry Player
Viatris belongs to the Zacks Medical Services industry. Another stock from the same industry, Avantor, Inc. (AVTR), has gained 2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Avantor, Inc. reported revenues of $1.74 billion in the last reported quarter, representing a year-over-year change of -8.7%. EPS of $0.28 for the same period compares with $0.37 a year ago.
For the current quarter, Avantor, Inc. is expected to post earnings of $0.25 per share, indicating a change of -26.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.5% over the last 30 days.
Avantor, Inc. has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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