A month has gone by since the last earnings report for Viatris (VTRS). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Viatris due for a breakout? 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 drivers.
Viatris Q3 Earnings Beat, Revenues Miss Estimates
Viatris reported adjusted earnings of 87 cents per share for the third quarter of 2022, easily beating the Zacks Consensus Estimate of 82 cents. The company had reported earnings of 99 cents for the year-ago quarter.
Total revenues came in at $4.1 billion, down 10.1% year over year. The top line missed the Zacks Consensus Estimate of $4.14 billion.
The U.S. dollar continued to strengthen across major currencies, that impacted the top line.
Quarter in Detail
Revenues include sales and other revenues. Sales of $4.1 billion were down 1% from the year-ago quarter on an operational basis.
The company reports results in four segments — Developed Markets, Emerging Markets, Japan, Australia and New Zealand (JANZ) and Greater China.
Developed market sales came in at $2.43 billion, down 8% from the year-ago quarter.
Sales from Emerging Markets came in at $678.9 million, down 14% year over year.
JANZ generated sales of $383 million, down 24%.
Sales from Greater China came in at $574 million compared with $566.8 million a year ago.
Base business brands increased 1% year over year on an operational basis, driven by products such as Lipitor, Brufen and Creon.
Lipitor sales were $420.4 million, up from $410 million in the year-ago quarter.
Complex generics and biosimilars performed slightly below management’s expectations and were down 4% due to increased competition and customer buying patterns. Revenues from the biosimilars portfolio to be contributed to Biocon Biologics totaled approximately $185 million in the quarter.
Generics, which include diversified product forms such as extended-release oral solids, injectables, transdermals and topicals, performed in line with expectations, including solid performance across the broader North American portfolio with the launch of lenalidomide in the United States. Sales were down 13%.
Viatris generated $144 million in new product revenues (revenues from products launched in 2022), primarily driven by lenalidomide, unbranded insulin glargine and interchangeable Semglee in the United States. It is on track to achieve approximately $525 million in new product revenues in 2022, which is below expectations due to the timing of launches but with better-than-expected margins.
Adjusted gross margin came in at 59.5% compared with 59.4% in the year-ago quarter.
In February, Viatris announced a definitive agreement with Biocon Biologics Limited whereby it will sell its biosimilars portfolio to the latter. Per the terms of the deal, Viatris will combine its biosimilars portfolio with Biocon Biologics Ltd in exchange for a 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% in Biocon Biologics on a fully diluted basis.
Revenues are projected between $16.2 billion and $16.7 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
At this time, Viatris has a nice Growth Score of B, a grade with the same score on the momentum front. 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.
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, Avantor, Inc. (AVTR), a stock from the same industry, has gained 7.7%. The company reported its results for the quarter ended September 2022 more than a month ago.
Avantor, Inc. reported revenues of $1.86 billion in the last reported quarter, representing a year-over-year change of +1.2%. EPS of $0.34 for the same period compares with $0.35 a year ago.
Avantor, Inc. is expected to post earnings of $0.30 per share for the current quarter, representing a year-over-year change of -16.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Avantor, Inc. has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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