Why Is Endo (ENDP) Down 33% Since Last Earnings Report?

It has been about a month since the last earnings report for Endo International (ENDP). Shares have lost about 33% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Endo 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 drivers.

Endo's Earnings & Revenues Trump Estimates in Q4

Endo reported better-than-expected results for fourth-quarter 2019.

The company’s earnings of 74 cents easily beat the Zacks Consensus Estimate of 57 cents in the reported quarter. However, earnings came in lower by a penny from the year-ago quarter’s 75 cents.

Revenues came in at $764.8 million in the quarter, surpassing the Zacks Consensus Estimate of $726.7 million. The revenue figure, however, declined 3% from the year-ago quarter. This decrease primarily resulted from competitive pressure in the Generic Pharmaceuticals segment and the Established Products portfolio of the Branded Pharmaceuticals segment. However, this was partially offset by continued solid growth in the Sterile Injectables segment and the Specialty Products portfolio of the Branded Pharmaceuticals segment.

Quarterly Highlights

Endo has four reportable business segments — Branded Pharmaceuticals, Generic Pharmaceuticals, Sterile Injectables and International Pharmaceuticals.

Branded Pharmaceuticals revenues were $226 million, down from the year-ago quarter’s $230 million, due to the prevalent generic competition in the Established Products portfolio. Specialty Products revenues increased 15% to $149 million on continued strong performance of Xiaflex. Sales of Xiaflex rose 27% to $102 million, primarily attributable to demand growth in both Peyronie's Disease and Dupuytren's Contracture indications, driven by continued commercial execution and investment in promotional activities.

In November 2019, the FDA accepted the company's original Biologics License Application (BLA) for its Collagenase Clostridium Histolyticum (CCH) product, for the treatment of cellulite in the buttocks. The target action date for the BLA has been set for Jul 6, 2020.

Sterile Injectables revenues came in at $285 million, up 10% year over year, aided by robust growth of Adrenalin and Vasostrict.

Generic Pharmaceuticals recorded sales of $226 million in the fourth quarter, down 14% due to competitive pressure on commoditized generic products. Nevertheless, the contribution of certain recent product launches partially negated the decline.

International Pharmaceuticals revenues came in at $29 million, marking a decline of 16% year on year.

2019 Results

Revenues came in at $2.9 billion for full-year 2019, down 1% from 2018. Earnings per share for 2019 came in at $2.38 compared with the prior year’s $2.89.

2020 Guidance

Endo expects revenues between $2.72 billion and $2.92 billion for 2020. The guidance assumes further erosion and competitive pressure for established brands. The company anticipates earnings from continuing operations to be $2.15-$2.40.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -6.59% due to these changes.

VGM Scores

At this time, Endo has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Endo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.