Watson Pharmaceuticals Inc.
) second quarter 2012 earnings (excluding special items) of $1.42
per share surpassed the Zacks Consensus Estimate by 4 cents.
Earnings increased 40.6% from the year-ago period. Double-digit
revenue growth helped boost earnings.
Revenues for the reported quarter increased 25.3% to $1.36
billion, beating the Zacks Consensus Estimate of $1.35 billion. All
segments contributed to the quarterly revenue growth.
On a reported basis, Watson Pharma recorded a loss of 49 cents
per share compared to earnings of 42 cents per share in the
year-ago period. The second quarter 2012 reported results reflect
the impact of charges related to the upcoming acquisition of
The company's Global Generics segment posted sales of $995
million, up 26%. The upside was driven by new product launches
including the generic version of
) blood-thinner Lovenox and
) cholesterol drug Lipitor (launched in November 2011).
International product sales for the division came in at $210.7
million, up 77%, driven by the acquisition of Specifar
Pharmaceuticals in May 2011 and Ascent Pharmahealth Ltd. in January
Watson Pharma's Global Brands revenue came in at $119.3 million,
up 6%. Increased contributions from products like Rapaflo, Crinone
and new product launches (Generess Fe, Rapaflo and Gelnique) aided
the performance of the segment. Androderm sales, however, were
Net revenue for the Distribution segment increased 37% during
the quarter to $240.9 million, due to increased third-party product
launches and higher base business sales. This segment consists of
only third-party product sales.
The company expects earnings in the range of $5.65 to $5.85 per
share (previous guidance - $5.55 to $5.80 per share). The company
maintained its revenue guidance of approximately $5.5 billion. The
Zacks Consensus Estimate currently stands at $5.75 per share on
revenues of $5.5 billion.
Watson Pharma expects the Global Generic segment to post
revenues of about $3.9 - $4.1 billion in 2012. Brand segment
revenue is expected in the range of $500 - $525 million.
Distribution segment revenue is expected to come in at about $950
million - $1 billion.
Neutral on Watson Pharma
We currently have a Neutral recommendation on Watson Pharma,
which carries a Zacks #2 Rank (short-term 'Buy' rating). We are
positive on the company's upcoming acquisition of Actavis which
should be immediately accretive. The deal is slated to go through
in the fourth quarter of 2012.
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