A month has gone by since the last earnings report for Valeant Pharmaceuticals International, Inc. VRX. Shares have lost about 4% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.

Valeant Q1 Earnings & Revenues Miss, View Raised

The company's adjusted earnings per share of $0.78 missed the Zacks Consensus Estimate of $0.96.

However, total revenue came in at $2.10 billion missing the Zacks Consensus Estimate of $2.16 billion and declined 11% from the year-ago quarter. The year-over-year decline was due to lower volumes in the U.S. Diversified Products and Branded Rx segments as a result of the loss of exclusivity for a number of products and challenging market dynamics. Revenues were also negatively affected by foreign currencies, divestitures and discontinuations, and a modest decrease in average realized pricing.

Quarter in Detail

Revenues in the Bausch + Lomb / International segment were $1.15 billion, up 0.3% year over year driven by increases in international volumes, particularly in Europe, the Middle East, South Africa, Asia and Australia which were partially offset by declines in volumes in the U.S.

Average realized pricing across the segment increased mainly from the international business units. However, volume and pricing gains were partially offset by the unfavorable impact of foreign currency and the impact of divestitures and discontinuations.

Revenues in the Branded Rx segment were $604 million, down 9% in the year-ago quarter mainly due to decreased volumes in the dermatology and Salix business units due to the loss of exclusivity of certain product lines, continued generic competition and the impact of an increase in the prevalence of high deductible medical plans.

Nevertheless, pricing improved in the dermatology business, driven by lower customer subsidies and accommodations and higher wholesaler selling prices. The Salix business benefited from higher wholesale selling prices and favorable chargeback. These increases were partially offset by higher managed care rebates particularly in the dermatology business.

Revenues in the U.S. Diversified Products segment were $355 million, a decline of 37% year over year due to a decrease in volume and lower average realized prices which in turn were attributed to loss of exclusivity for products in the segment.

Research and development expenses were $96 million in the reported quarter, down 6.8% from the year-ago quarter.

Selling, General and Administrative costs were $661 million compared with $813 million in the year-ago quarter.

During the quarter, the company reduced debt by $1.3 billion. On a cumulative basis, the company reduced total debt by $3.6 billion since the end of the first quarter of 2016. Moreover, the company completed more than $1.3 billion in asset sales, including the earlier-than-expected closure of the sale of the CeraVe, AcneFree and AMBI skincare brands.

On a positive note, the FDA approved its new psoriasis treatment, Siliq. The company also resubmitted its glaucoma treatment, Vyzulta (latanoprostene bunod) in Feb 2017 and the FDA granted a PDUFA date of Aug 24. Meanwhile, the company completed two successful phase III studies on IDP-118, a topical psoriasis treatment. The company recruited and launched a new primary care sales force for Xifaxan. The company also licensed EGP-437 from EyeGate Pharmaceuticals for a new eye care indication.

2017 Guidance  

The company continues to expect total revenue in the range of $8.90–$9.10 billion but raised its guidance for adjusted EBITDA by $50 million. The company will close the sale of Dendreon to Sanpower Group for $819.9 million in mid-2017. The company plans to use the proceeds from the divestiture to pay down its high levels of debt.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

VGM Scores

At this time, Valeant's stock has a strong Growth Score of 'A', 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 20% 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.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.