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Analysts Having Difficulty Getting Comfortable With Valeant's Fundamentals

Analysts Having Difficulty Getting Comfortable With Valeant's Fundamentals

Gary Nachman of BMO Capital Markets has some good news and bad news for Valeant Pharmaceuticals Intl Inc (NYSE: VRX)'s investors following the company's third-quarter earnings report.

The good news is that Valeant's new segment reporting could provide greater visibility on its business outlook. The segments, Bausch & Lomb/International, Branded Rx and U.S. Diversified, all help the analyst revise his estimates.

On the other hand, the analyst stated that "significant pressures" remain in multiple key areas which prompted a revision in Valeant's stock outlook.

Analyst Concerns

The analyst noted the following five concerns:

    1. 2017 will be a poor year within the U.S. Diversified segment.
    2. It remains unclear if core assets in 2017 can see revenue growth of just a mid-single-digit and EBITDA by a high-single-digit.
    3. Potential asset sales to reduce debt remains an unknown.
    4. Production issues and disruptions need to be resolved.
    5. The challenge of balancing the need to cut costs while simultaneously reinvesting in the product pipeline and key areas of growth.

Analyst Reactions

Nachman continued that based on Valeant's "significantly lower" 2016 guidance and cautious commentary surrounding 2017, the analyst lowered his revenue estimates meaningfully by $297 million in 2016 and between $905 million and $1.105 billion in 2017 through 2020 and also lowered his earnings per share estimate by $0.96 for 2016 and between $2.00 and $2.36 per share from 2017 through 2020.

Specifically, the analyst is modeling the company to earn $9.623 billion in revenue for the full year 2016 and $9.32 billion in fiscal 2017. In addition, Valeant is now expected to earn $5.47 per share in 2016 and $5.36 per share the following year.

Shares remain Market Perform rated with a price target slashed to $21 from a previous $29.

Latest Ratings for VRX

Jun 2018DowngradesBuyHold
Jun 2018UpgradesEqual-WeightOverweight
May 2018UpgradesNeutralBuy

View More Analyst Ratings for VRX
View the Latest Analyst Ratings

Posted-In: Bausch & Lomb Gary NachmanAnalyst Color Biotech Price Target Reiteration Analyst Ratings General Best of Benzinga


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