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Why Is Bausch (BHC) Up 23% Since Last Earnings Report?

It has been about a month since the last earnings report for Bausch Health (BHC). Shares have added about 23% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Bausch due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Q2 Earnings & Sales Miss, View Cut

The company’s adjusted earnings per share of 55 cents missed the Zacks Consensus Estimate of 89 cents and decreased from 98 cents reported in the year-ago quarter.

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Total revenues of $1.97 billion missed the Zacks Consensus Estimate of $2 billion and fell 6% year over year.

Revenues in the quarter were affected by the unfavorable impact of foreign exchange of $61 million and the impact of divestitures and discontinuations of $74 million, primarily due to the sale of Amoun Pharmaceutical Company S.A.E. on Jul 26, 2021. Revenues were flat on an organic basis year over year.

Quarter in Detail

The company reported revenues in five segments – Salix, International, Diversified Products, Solta Medical and Bausch + Lomb.

Salix revenues came in at $501 million, down 3%. The decrease was primarily due to lower sales of Trulance, which was partially offset by increased sales of Xifaxan (rifaximin) and Plenvu. Xifaxan revenues were up 1%.

International Rx revenues in the quarter were $233 million, down 26%.

Diversified Products revenues were $235 million, down 11% from the year-ago quarter, primarily attributable to a decrease in volumes attributable to the neurology business and lower net realized pricing. Revenues from Jublia increased 13% as the brand continues to benefit from marketing investment.
Solta Medical reported revenues of $57 million resulting from the impact of ongoing COVID-related lockdowns

Revenues from Bausch + Lomb were $941 million, up 1% year over year.  Excluding the unfavorable impact of foreign exchange of $46 million and the impact of divestitures and discontinuations of $3 million, revenues increased organically by 6% year over year, driven by sales growth in Vision Care and Surgical, offset by lower revenues from Ophthalmic Pharmaceuticals.

2022 Guidance Lowered

Revenues are now expected in the $8.05-$8.22 billion range (earlier projection: $8.25-$8.40 billion) due to the uncertainties in the overall operating environment.

Initial Public Offering of Bausch + Lomb

Bausch Health's eye health business, Bausch + Lomb, launched its initial public offering (IPO) and subsequently began trading under the ticker "BLCO" on May 6, 2022.

On Jun 16, 2022, Bausch Health announced it was suspending its plans for the Solta IPO as a result of challenging market conditions and other factors. Solta will remain part of Bausch Health, as it plans to revisit alternate paths for its Solta medical aesthetic devices business.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Bausch has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Bausch has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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