Valeant Pharmaceuticals Intl Inc (NYSE: VRX)
Valeant Pharmaceuticals has been dealing with a very rough time as of late. While I would like to say the struggle is over, I don't believe that to be the case. Don't get me wrong, I've said it before and I'll say it again, in the long run, I'm expecting to see great things out of VRX. However, I believe that tomorrow morning the company is going to hit its last hurdle before long-term growth. Today, we'll talk about what that hurdle is, what we can expect to see in the short term, and what we can expect to see in the long-term outlook with regard to VRX.
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Valeant Pharmaceuticals Is Set To Disappoint On Earnings
VRX is expected to release its earnings report for the fourth quarter of 2015 before the market opens tomorrow. This is what I believe will be the next (and hopefully last) hurdle for VRX to get over before we can expect to see long term-growth. During the quarter, analysts have estimated that we will see $2.61 in earnings per share on revenue in the amount of $2.75 billion. If this were the case, we would see incredible year-over-year growth from in both EPS and revenue from $2.58 and $2.28 billion respectively. This would be great, but in reality, it doesn't seem as though this is going to happen.
The truth is that in the fourth quarter, Valeant Pharmaceuticals hit a brick wall. It was in this quarter that Citron started accusing VRX of being the Enron of the pharmaceutical industry, citing their relationship with an underground pharmacy known as Philidor as the reason they have been able to manipulate investors. As a result, Valeant was forced to cancel its agreement with Philidor, their biggest customer. This undoubtedly will cost VRX a massive amount of revenue and likely cause earnings to dive! So, I'm expecting for VRX to miss earnings expectations, leading to investor fears.
What We Can Expect To See From Valeant Pharmaceuticals In The Short Term
In the short term, I have a very bearish opinion of what we can expect to see. The truth is that I think that VRX is going to dive on earnings. As investors, we know that there are few pieces of news that have the ability to move the needle in the market quite like earnings. So, with the poor earnings expectations, I'm expecting investors to react in a negative way. Therefore, tomorrow - and likely throughout the rest of the week - I'm expecting to see declines on VRX.
What We Can Expect In The Long Run
In the long run, I have an overwhelmingly bullish opinion of what we can expect to see from Valeant Pharmaceuticals. While the company has struggled as of late with regard to the Philidor issue and the fact that the CEO of the company was on medical leave for more than a month, I believe that when we talk about VRX, we're talking about a strong company. There's no doubt in my mind that VRX has the ability to make a comeback from the lows we're seeing on the stock and the declines we're likely to see tomorrow. The reality is that they are already seeing a strong recovery in prescription numbers thanks to their relationship with Walgreens. On top of that, the company has a long line of incredible products, a great management team, and perhaps most importantly, an impressive track record of success. All in all, while there is a reason to be bearish in the short run, I'm expecting to see long-term gains from Valeant Pharmaceuticals.
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What Do You Think?
Where do you think VRX is headed moving forward and why? Let us know your opinion in the comments below!
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