Viatris (VTRS) Up 13.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Viatris (VTRS). Shares have added about 13.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Viatris 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.

Viatris' Q1 Earnings Beat, Revenues Miss Estimates

Viatris reported adjusted earnings of 93 cents per share in the first quarter of 2022, easily beating the Zacks Consensus Estimate of 81 cents. In the year-ago quarter, the company reported earnings of 92 cents.

Quarter in Detail

Revenues include sales and other revenues.  Sales of $4.18 billion were down 5% from the year-ago quarter.

The company reports results in four segments — Developed Markets, Emerging Markets, JANZ (Japan, Australia and New Zealand) and Greater China.

Developed market sales came in at $2.5 billion, down 4% from the year-ago quarter.

Sales from Emerging Markets came in at $705.2 million, down 7% year over year.

JANZ generated sales of $423.8 million, down 12%.

Sales from Greater China came in at $573.1 million compared with $591.9 million a year ago.

On the basis of product category, Brands performed better than management expectations, driven by products such as Lipitor, Effexor and Perforomist. It generated revenues of $2.5 billion.

Complex generics and biosimilars grew 19%, largely driven by generic Restasis launch in February 2022, partially offset by competition in select complex generics products. However, the generics business raked in sales of $1.2 billion, down 8%.

Viatris generated $120 million in new product revenues (revenues from products launched in 2022), primarily driven by the launch of generic Restasis and interchangeable Semglee in the United States. It is on track to achieve approximately $600 million in new product revenues in 2022.

Adjusted gross margin came in at 59.5% compared with 59.6% in the year-ago quarter.

Other Updates

In February, Viatris announced a definitive agreement with Biocon Biologics Limited whereby it will sell its biosimilars portfolio to the latter.  Under the terms of the deal, Viatris will combine its biosimilars portfolio with Biocon Biologics Ltd in exchange for pre-tax consideration of up to $3.335 billion.

Viatris will receive $3 billion in consideration in the form of a $2 billion cash payment and $1 billion of convertible preferred equity at the time of close. Viatris will own a stake of at least 12.9% of Biocon Biologics on a fully diluted basis.

Along with first-quarter results, management stated that its transaction with Biocon Biologics is progressing and is expected to close in the second half of 2022.

Guidance Reiterated

Revenues are projected between $17 billion and $17.5 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Viatris has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Viatris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Viatris is part of the Zacks Medical Services industry. Over the past month, AMN Healthcare Services (AMN), a stock from the same industry, has gained 14.2%. The company reported its results for the quarter ended March 2022 more than a month ago.

AMN Healthcare reported revenues of $1.55 billion in the last reported quarter, representing a year-over-year change of +75.2%. EPS of $3.49 for the same period compares with $1.70 a year ago.

AMN Healthcare is expected to post earnings of $3 per share for the current quarter, representing a year-over-year change of +82.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +5.5%.

AMN Healthcare has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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