Markets

Mallinckrodt (MNK) Tops on Earnings in Transition Quarter

Mallinckrodt Public Limited CompanyMNK reported positive results for the transition quarter (Oct 1, to Dec 30, 2016) beating both sales and earnings expectations.

The last quarter of 2016 was the planned transition period as the company aligns to a calendar-based financial year.

The company reported adjusted earnings of $1.91 per share in the reported quarter, beating the Zacks Consensus Estimate of $1.81. Earnings were however down from the year-ago figure of $1.97. Higher sales and profits in the Specialty Brands segment offset the weakness in Specialty Generics.

Net sales in the quarter came in at $829.9 million, up 2.3% year over year, and beat the Zacks Consensus Estimate of $824.8 million. Top-line growth was primarily driven by volume-based growth in the company's diversified Specialty Brands segment, which continued to contribute more than 70% to the top line.

Mallinckrodt's share price declined 36.6% in the past one year, compared with the Zacks classified industry's fall of 20.8%.

Mallinckrodt's share price declined 36.6% in the past one year, compared with the Zacks classified Medical-Generics Drugs industry's fall of 20.8%.

Quarter in Detail

The company reports results under two segments - Specialty Brands and Specialty Generics.

Sales at the Specialty Brands segment were $603.1 million, up 11% from the year-ago quarter. Acthar, Mallinckrodt's largest product, garnered sales of $325.4 million, up 13.5%. Ofirmev sales grew 8.4% year over year to $72.5 million. Inomax, its second-largest product, generated sales of $118.3 million, up 6.8%. Sales of the Therakos immunology platform were $47.4 million, down 6.0% due to third-party manufacturer production issues. The company expects to resolve the third-party manufacturer production issues by the second quarter of 2017.

As expected, weakness in the Specialty Generics segment continues. The segment recorded sales of $212.9 million, down 17.4% due to net sales declines in various product categories due to continued competition and channel consolidation negatively impacting both price and volume.

Adjusted selling, general and administrative (SG&A) expenses in the reported quarter increased 4%. Meanwhile, research and development (R&D) expense was up 7.8%.

2017 Guidance

The company expects sales to decline by 2-5% in 2017 primarily due to persistent decline in the Specialty Generics segment. While the Specialty Brands segment is expected to increase by 4-7%, the Specialty Generics segment should decline by 21-25%. Earnings per share are projected around $7.40- $8.00. The Zacks Consensus Estimate for 2017 is $7.55.

Mallinckrodt PLC Price and EPS Surprise

Mallinckrodt PLC Price and EPS Surprise | Mallinckrodt PLC Quote

Our Take

The results for the transition quarter were strong as the company beat on earnings and sales driven by solid growth in the Specialty Brands segment. However, the guidance for 2017 was disappointing as weakness in the Specialty Generics segment will negatively impact the top-line growth.

The company is currently streamlining its business. The company's move aims to focus better on its specialty pharmaceutical business after having sold its Nuclear Imaging business. The company also entered into a definitive agreement to divest the Intrathecal Therapy business.

Zacks Rank & Key Picks

Mallinckrodt currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the health care sector include Sucampo Pharmaceuticals SCMP , Enzo Biochem, Inc. ENZ and Sunesis Pharmaceuticals SNSS . While Sucampo sports a Zacks Rank #1 (Strong Buy), Enzo and Sunesis carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Sucampo's earnings estimates were stable at $1.22 for 2016 but have increased from $1.58 to $1.74 for 2017 over the last 60 days. The company posted a positive earnings surprise in all of the four trailing quarters with an average beat of 35.5%.

Enz Biochem's loss estimates for 2017 narrowed 5.88% over the past 60 days. The company recorded a positive earnings surprise in three of the last four quarters, the average being 22.50%. Its share price was up 57.6% in the past one year.

Sunesis' loss estimates narrowed by 5.06% and 8.80% for 2016 and 2017, respectively, over the past 30 days. The company recorded a positive earnings surprise in three of the last four quarters, the average being 0.54%.

Just Released - Driverless Cars: Your Roadmap to Mega-Profits Today

In this latest Special Report, Zacks' Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making - autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Enzo Biochem, Inc. (ENZ): Free Stock Analysis Report

Sucampo Pharmaceuticals, Inc. (SCMP): Free Stock Analysis Report

Mallinckrodt PLC (MNK): Free Stock Analysis Report

Sunesis Pharmaceuticals, Inc. (SNSS): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

VIRX ENZ

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More