Endo Pharmaceuticals‘ (ENDP) fourth quarter 2011 earnings (excluding special items) of $1.40 per share surpassed the year-ago earnings by 34 cents and the Zacks Consensus Estimate by 8 cents. The impressive showing was attributable to the higher revenues reported in the final quarter of 2011.
The Fourth Quarter in Details
Revenues climbed 57% to $803.4 million in the reported quarter. The revenue increase was attributable to impressive performances across all segments at Endo Pharma. Revenues edged past the Zacks Consensus Estimate of $803.0 million.
The final quarter of 2011 witnessed a 16% rise in the sale of branded pharmaceuticals to $458.0 million. The impressive showing was driven primarily by pain drugs Lidoderm (up 12% to $232.3 million), Opana ER (up 46% to $109.1 million) and osteoarthritis drug Voltaren Gel (up 23% to $38.5 million). The sale of generic products at Endo Pharma jumped 131% to $151.0 million in the fourth quarter of 2011.
Revenues from the segment were aided by the inclusion of results from Qualitest Pharmaceuticals (a generic company). We remind investors that Qualitest Pharmaceuticals was purchased by Endo Pharma in 2010 for $1.2 billion in cash.
Revenues from devices sales came in at $142.0 million in the reported quarter. Revenues came from the acquisition of American Medical Systems, a leading pelvic-health devices provider, in June 2011. The remaining revenues came from services sales.
Adjusted operating expenses climbed 58.2% to $280 million. Costs related to the acquisition of American Medical Systems contributed to the increase.
Annual Results
For full year 2011, Endo Pharma earned $4.69 per share (up 35%). 2011 earnings surpassed the Zacks Consensus Estimate by 8 cents and were above the company’s guidance range of $4.55-$4.65 per share. Earnings were driven by higher revenues.
Revenues climbed 58.7% to $2.73 billion in 2011 driven by impressive performances across all segments at Endo Pharma. Revenues were within the guidance range of $2.72-$2.80 billion provided by the company. 2011 revenues edged past the Zacks Consensus Estimate of $2.71 billion.
2012 Projection
Apart from disclosing financial results, Endo Pharma provided guidance for 2012. The company expects revenues in the range of $3.15-$3.30 billion, well above 2011 levels. The Zacks Consensus Estimate of $3.24 billion is well within the company’s guidance range.
Endo Pharma expects to end 2012 with adjusted earnings in the range of $5.00-$5.20.The guidance is much below the pre-earnings Zacks Consensus Estimate of $5.47. We believe higher than expected effective tax rate (30.5%-31.5% as opposed to 27% in 2011) and operating expenses are responsible for the weak earnings guidance. The Zacks Consensus Estimate has been revised following the company’s guidance and currently hints at earnings of $5.05 per share for 2012.
Our Recommendation
We have a Neutral stance on Endo Pharma. The stock carries a Zacks #3 Rank (Hold rating) in the short run.
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