Why Is Endo International (ENDP) Down 15% Since its Last Earnings Report?

A month has gone by since the last earnings report for Endo International plc ENDP. Shares have lost about 15% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is ENDP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Endo Surpasses Earnings, Revenue Estimates

Endo reported fourth-quarter 2017 results wherein both earnings and revenues surpassed estimates but declined significantly year-over-year. Earnings from continuing operations were $0.77 cents which beat the Zacks Consensus Estimate of $0.62. However, earnings declined significantly from $1.77 recorded in the year-ago quarter.

Revenues came in at $769 million in the quarter, surpassing the Zacks Consensus Estimate of $764.81 million. However, the top line was down 38% year over year, primarily due to the loss of marketing exclusivity in the first half of 2017 for the first-to-file products, the generic version of Zetia (ezetimibe tablets) and the generic version of Seroquel XR (quetiapine extended-release (ER) tablets) both of which were launched in fourth-quarter 2016.

Moreover, the product discontinuances in the generic pharmaceuticals segment, pricing pressure from increased competition primarily impacting the generics base business, the divestitures of Litha and Somar, as well as the cessation of Opana ER shipments to customers by Sep 1, 2017 accounted for the decline.

Quarterly Highlights

Endo reports results through three segments — Branded Pharmaceuticals (U.S.), Generic Pharmaceuticals (U.S.) and International Pharmaceuticals.

U.S. Branded Pharmaceuticals sales were down 21% to $228 million, as generic competition is impacting the company’s established products portfolio and cessation of product shipments of Opana ER. However, Xiaflex sales increased 10% year over year reflecting strong volume growth of the product.

In December 2016, Endo terminated its worldwide license and development agreement with BioDelivery Sciences International, for Belbuca and returned the product.

U.S. Generic Pharmaceuticals recorded sales of $499 million in the quarter, down 43% due to the loss of marketing exclusivity for the first-to-file products ezetimibe tablets and quetiapine ER tablets in the first half of 2017. Product discontinuances and pricing pressure from increased competition impacted the generic base business. Nevertheless, sterile Injectables revenue increased 16% driven primarily by Adrenalin.

The International Pharmaceuticals division garnered sales of $41 million, down from $70 million in the year-ago quarter due to recent divestitures.  Endo sold Mexican subsidiary, Somar, to Advent International in October 2017. Endo also sold its South African subsidiary, Litha Healthcare Group in July 2017.

2017 Results

Revenues came in at $3.47 billion, down 14% from 2016 and in line with the Zacks Consensus Estimate. Earnings per share of $3.84 were down from $4.73 in 2016 but surpassed the Zacks Consensus Estimate of $3.67.

2018 Outlook

Endo expects revenues between $2.6 billion and $2.8 billion in 2018, below the Zacks Consensus Estimate of $3.06 billion. The company anticipates earnings from continuing operations in the range of $2.15-$2.55 per share, much below the Zacks Consensus Estimate of $2.86.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted by 19.6% due to these changes.

Endo International plc Price and Consensus

Endo International plc Price and Consensus | Endo International plc Quote

VGM Scores

At this time, ENDP has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise ENDP has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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