Health and Healthcare

Can Valeant Turn Itself Around With This Earnings Report?

Chris Lange

Published: November 7, 2016 10:55 am

Last Updated: January 13, 2020 1:24 am

Valeant Pharmaceuticals International Inc. (NYSE: VRX) is scheduled to report its third-quarter financial results before the markets open on Tuesday. Halfway through the third quarter, it looked like Joe Papa had really turned this company around, as Valeant shares were up nearly double from their lows, but it has been a different story of late. These earnings could recapture the positive sentiment we saw in August, but they could also send shares even lower.

The Thomson Reuters consensus estimates are $1.75 in earnings per share (EPS) and $2.49 billion in revenue for the quarter. The same period of last year reportedly had EPS of $2.74 and $2.79 billion in revenue.

Back in August, the company announced that it has appointed a new chief financial officer (CFO). Considering the recent history of Valeant, it seems that most people would stay away from the job of overseeing the books of this company.

Valeant announced that Paul S. Herendeen has been appointed Executive Vice President, Finance and will take over the role of CFO from Robert L. Rosiello effective immediately. Rosiello will remain at Valeant as Executive Vice President of Corporate Development and Strategy.

Just prior to these appointments, Morgan Stanley upgraded the stock to a $42 price target from $33. This was one of the first actual ratings that encouraged investors to buy Valeant shares.

Overall, the brokerage firm is more constructive on the stock after company’s positive announcements, including reiteration of 2016 outlook and plans to sell assets to pay down debt. Valeant is offering to pay lenders higher interest rates in order to obtain an amendment to its debt agreement that would loosen one of its covenants. Morgan Stanley expects Valeant to successfully renegotiate its debt covenants on modest terms. That will allow the company to pay off about $5 billion in debt over the next year or so. This also will be helped by asset sales or divesting, which could help bring in billions of dollars in liquidity.

However since that time, shares have dropped to just above their 52-week lows.

A few other analysts have commented on Valeant as well:

• Canaccord Genuity reiterated a Hold rating with a $33 price target.
• BTIG Research has a Neutral rating with a $24 price target.
• Wells Fargo has an Underperform rating.
• Mizuho reiterated a Neutral rating with a $25 price target.
• JPMorgan reiterated a Neutral rating.
• Deutsche Bank has a Hold rating with a $29 price target.

So far in 2016, Valeant has vastly underperformed the broad markets, dropping more than 80%. Over the past 52 weeks, the stock is down 77%.

Shares of Valeant were trading at $19.34 on Monday, with a consensus analyst price target of $36.11 and a 52-week trading range of $17.75 to $119.87.