Valeant (VRX) Misses, Lowers, Delays - Wells Fargo's Maris

Wells Fargo analyst David Maris offered some comments on Valeant Pharmaceuticals (NYSE: VRX) following its Q3 miss and lower outlook.

Maris commented, "Valeant reported 3Q results that missed expectations. Revenue of $2.48 billion missed our estimate of $2.74 billion and consensus of $2.51 billion. Valeant's adjusted EPS of $1.55 missed our $1.95 estimate and consensus of $1.75. We had assumed Valeant would experience some tailwinds from pricing, higher rebates, and increased prior-authorizations; however, it appears Valeant's core business continue to deteriorate, as we had feared, and the 2H acceleration management predicted is not materializing. As we had predicted, Valeant lowered its full-year 2016 guidance. Valeant now expects full-year adjusted EPS in the range of $5.50-$5.60, a revision of approximately $1.40 at the midpoint and equates to an implied 4Q adjusted EPS of $1.19 vs. current consensus of $2.04. As we mentioned in our preview, current consensus for 2017 adjusted EPS is currently $7.60 and is at significant risk, in our opinion. We note that adjusted EPS benefited from SG&A cuts and addbacks of items like legal expenses, which are cash expenses and, to us, are neither one time nor unexpected but rather reflective of the business."

The firm said cash from operations remains a concern for them. Valeant generated approximately $570 million in cash from operations in 3Q, approximately $163 million less than a year ago, and approximately $50 million less than two years ago. "We do not quite understand how a business that spent more than $15 billion to acquire assets experiences deteriorating cash generation," he said.

Valeant recognized a goodwill impairment charge of $1.05 billion in the quarter, which it attributes largely to Salix.

The firm maintained an Underperform rating and $17-$22 valuation range.

For an analyst ratings summary and ratings history on Valeant Pharmaceuticals click here. For more ratings news on Valeant Pharmaceuticals click here.

Shares of Valeant Pharmaceuticals closed at $19.13 yesterday.

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