When Bausch Health (TSX:BHC) posted quarterly results on Nov. 3, the stock did not move by much end ended going nowhere.
BHC posted a non-GAAP EPS of $1.31. Revenue fell 3.2% Y/Y to $2.14 billion. BHC stock did not react positively to the results because the B+L spin-off introduces uncertainties for investors.
The company may apply the proceeds of the sale to pay down debt. Yet the reality is that the company may dilute investors.
BHC could have planned to sell off Salix instead of B+L since the unit is the main reason the debt increase. Conversely, B+L is a cash cow with plenty of continued potential for covering costs and paying down interest on the debt.
Slow B+L Sale
On the conference call, the CFO suggested the B+L spinoff will not happen for another two years (2022), which is far longer than the company suggested initially. Markets are impatient and want results sooner.
BHC may continue to pay down at that time but cash flow growth is slow. This suggests that the stock will not move anywhere for a few quarters.
Investors are better off holding drug stocks with growth catalysts ahead.
BHC’s unit spinoff is not a positive catalyst but a step in the right direction. Investors should continue watching its key drug product sales quarterly. And keep expecting the B+L revenue to trend higher as eye product sales recover.
