Watson Beats; In-Line Guidance - Analyst Blog


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Watson Pharmaceuticals Inc. 's ( WPI ) 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 Actavis.

Quarterly Details

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 Sanofi 's ( SNY ) blood-thinner Lovenox and Pfizer 's ( PFE ) 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 2012.

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 lower.

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.

Guides In-Line

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.

PFIZER INC (PFE): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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