BMO Capital Cuts Price target on Valeant Pharma (VRX) Following Poor 3Q Legacy Business Performance
BMO Capital maintained an Outperform rating on Valeant Pharmaceuticals (NYSE: VRX), and cut the price target to $265.00 (from $273.00), following the company's 3Q15 earnings results. VRX beat expectations for the quarter, however, the results showed that the legacy business had underperformed.
Analyst Alex Arfaei commented, "Although Valeant beat expectations in 3Q15, the results showed that the legacy business (ex-Salix) had underperformed. However, the strong performance of the Salix business is encouraging because it will be a key growth driver in 2016. This is one of the reasons our 2016 estimates are above consensus (e.g. EBITDA of $7.70Bn vs. consensus of $7.45Bn and guidance of at least $7.5Bn). We believe that concerns about changes in R&D strategy are overdone; management appears to be making opportunistic investments by increasing R&D from 3.1% of revenues in 2015 to ~3.5% in 2016. We’ve lowered our forecasts to reflect lower performance from the legacy business and slightly higher R&D. Our 2015 estimates are now at the mid-point of guidance, reflecting a cautious outlook, particularly for the legacy business."
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Shares of Valeant Pharmaceuticals closed at $163.83 yesterday.