Bausch Analyst Sees Challenging Setup For Next Leg Of Recovery Story

Bausch Health Companies Inc BHC reported Monday ahead of the market open with better-than-expected third-quarter revenue and higher non-GAAP earnings. The company also raised its fiscal year 2019 guidance.

The Analyst

Bank of America Merrill Lynch analyst Jason Gerberry reiterated an Underperform rating and $19 price target. 

The Takeaways

Bausch's revenue beat was driven by better Xifaxan price tailwinds and the outperformance of diversified brands, Gerberry said in a Monday note. (See his track record here.)

With both segments having high margins, the company achieved strong margins, P&L leverage and a mid-to high-single-digit beat on EBITDA, the analyst said. 

The Bausch & Lomb international segment missed the consensus estimate by 2% due to softness in surgical and ophtho prescriptions, but the contact lens sub-segment was in line, he said. 

The dermatology business beat BofA's forecast and was in line with the consensus estimate. 

Gerberry also pointed to the company's statement regarding the potential it sees from the early days of launch of its psoriasis medication Duobrii.

"Overall, we view the quarter update as mixed given questionable sustainability of diversified brands, Xifaxan driven price and miss on Bausch & Lomb segment offers little read-through to 2020+."

BofA continues to see a challenging setup for the next leg of the company's recovery story given its limited pipeline replacement value, the analyst said.

Price Action

Bausch shares were trading down slightly at $25.91 at the time of publication.

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