The latest quarterly earnings report from Bausch Health (TSX:BHC) put an end to the string of solid, rosy results. This time, the firm posted Q4 non-GAAP earnings of $1.12 and revenue growing 4.7% to $2.22 billion.
Why did the stock sell off afterward?
BHC posted a loss because of a one-time litigation cost but it also said it would sell $3.25 billion worth of debt. The debt offering is a positive development because of favorable interest rates. In effect, the cost of managing debt falls, increasing cash flow.
Plus, the later maturity (of 2022 and 2024) gives the company more time in building its business. As sales recover and cash flow grows, the company will have even more cash to pay down its debt.
Bausch reiterated an EBITDA target of $4.1 billion. It should report a $3.75B EBITDA for 2020. Although Vyzulta will not meet the company’s revenue expectations, Duobrii is showing strong demand. It now has 42% of new patient starts in its drug category. Salix is another rebound story.
In Q4, revenue rose from $426 million to $517 million. SG&A was flat from last year while R&D surged from $5 million to $88 million Y/Y. that level of investment should lead to an acceleration in revenue.
Selling pressure in BHC stock may continue but it will not last long. Buy the stock on the dip.
