Valeant Pharmaceuticals (NYSE: VRX) held a conference call with investors on Thursday, January 8th, in which the company increased its guidance for 2015. Initially, Valeant had predicted $9.1 billion in revenue and $10 cash earnings per share for 2015. They increased estimates to $9.2 to $9.3 billion in revenue and $10.10 to $10.40 cash earnings per share. Shares spiked nearly 6.9% during intraday trading after the announcement, jumping from $145 to $155.
Valeant is a diverse pharmaceutical company that offers both over-the-counter and prescription drugs. Most of their drugs focus on dermatological needs and eye health, though their drugs cover a wide array of needs.
The pharmaceutical company has a history of acquiring other companies as a growth strategy. In the past two years, Valeant has completed the acquisition of 4 companies. This seems to have worked as a growth strategy considering the company’s revenue increased from $3.48 billion to $5.76 billion from 2012 to 2013. Results from 2014 are not yet posted on Valeant’s website.
However, Valeant hit a rough patch in 2014 when the company failed to acquire Allergan, the maker of Botox. Valeant lost the bid for Allergan to a deal backed by Bill Ackman’s Pershing Square Capital Management. Valeant CEO Mike Pearson referred to the failed acquisition as a “speedbump” and remained optimistic.
According to AnalystRatings.com, analyst Neil Maruoka of Canaccord Genuity maintained a Buy rating on Valeant on January 9th. The analyst referred to the failed takeover of Allergan, noting that the incident forced Valeant “to take stock of its own business.” The upshot of the botched deal was threefold: “1) a ‘galvanized’ organization focus on driving results and organic growth; 2) a stronger balance sheet with net leverage of 3.5x at the end of 2014; and 3) improved financial disclosure and transparency.” Maruoka concluded, “We believe that Valeant continues to build a strong global pharmaceuticals business that is more than just a platform for new acquisitions.”
Neil Maruoka has rated Valeant 4 times since April with a 75% success rate recommending the company and a +15.9% average return per Valeant recommendation. Overall, he has a 75% success rate recommending stocks with a +4.5% average return per recommendation.
Separately on January 9th, analyst Tim Chiang of CRT Capital maintained a Buy rating on Valeant and raised his price target from $170 to $180. Chiang referred to the conference call, noting “the 2015 guidance call reaffirmed the strong fundamentals, along with the potential for more tuck in [merger and acquisition] deals which could generate upside.” He continued, “On the call, management highlighted that its target list of potential [merger and acquisition] candidates (mostly private) remains large, with potential areas of interest in the eye care/ [dermatology]/dental/surgical segments. On a geographic level, Valeant is not just interested in US assets, and may have an affinity to be more active in Asia/Pacific region in 2015.”
Tim Chiang has rated Valeant 3 times since June of 2013 with a 67% success rate recommending the company and a +20.3% average return per Valeant recommendation. Overall, he has a 96% success rate recommending stocks with a +28.9% average return per recommendation.
In a report published by AnalystRatings.com, analyst Irina Rivkind of Cantor Fitzgerald reiterated a Buy rating onValeant with a price target of $184 on January 9th. Rivkind responded to the increased guidance announced on the conference called, attributing it to “strong launches, which are expected to contribute over $550-700M, and the addition of $160M in sales from the 4Q:14 Marathon hospital specialty products portfolio acquisition, offset by approximately $200M in generic impact (mostly in 2H:15) and $300M in negative FX (with a negative $0.47 EPS impact). Valeant also expects to deliver 4Q:14 EPS at the top of its prior guided range (>$2.55).” Rivkind continued that she is impressed by “the CEO’s commitment to the business (moving to 100% stock compensation), the sheer size of the 2016 pipeline (8 potential launches), and the double-digit organic growth of the business.”
Irina Rivkind has rated Valeant 7 times since March of 2014 with a 86% success rate recommending the company and a +16.8% average return per Valeant recommendation. Overall, she has a 67% success rate recommending stocks with a +19.3% average return per recommendation.
On average, the top analyst consensus for Valeant Pharmaceuticals on TipRanks is Strong Buy.