Valeant Isn't A Quick Fix; Barclays Remains Positive
Valeant Pharmaceuticals Intl Inc (NYSE: VRX) reported its 1Q16 EPS significantly short of expectations. Barclays’ Douglas D. Tsao maintained an Equal Weight rating for the company, with a price target of $34.
Disruptions To Continue
Analyst Douglas Tsao commented that disruption in certain segments of Valeant’s business was “anything but a quick fix” and the company’s share performance would depend on the achievement of targets over the next few quarters.
Valeant’s FY16 guidance indicated potential disruptions in the longer ¬term, mainly in the dermatology franchise, which generated revenue of only $228.6M, down 43 percent y/y. The company lowered its FY16 guidance significantly, projecting revenues of $9.9-$¬10.1B, adjusted EPS of $6.60-¬$7.00 and adjusted EBITDA of $4.80-¬$4.95.
“We see some risk in that the guidance reset still implies fairly strong EBITDA margins,” Tsao wrote.
Other Segments Intact
While Valeant’s performance was significantly impacted by weakness in dermatology, investors should keep in mind that the performance of other key segments was not disappointing, the analyst noted. Contact lens was up 9 percent y/y, while consumer performed in-line with expectations of 1 percent y/y growth.
Valeant’s dermatology pipeline products could help revive the segment, Tsao stated. He added, however, that investors could seek greater clarity into the dermatology franchise’s underlying profitability.
Latest Ratings for VRX
|Dec 2016||Morgan Stanley||Downgrades||Overweight||Equal-Weight|
|Nov 2016||Rodman & Renshaw||Downgrades||Buy||Neutral|
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