Valeant Earnings Impress, VRX Stock Rallies

Controversial drug maker Valeant Pharmaceuticals International Inc. (NYSE: VRX) once again lowered its revenue guidance on Tuesday, but VRX stock rose more than 7 percent in morning trading as investors are hopeful that the company is taking positive steps to get business back on track.

Excluding items, VRX reported second-quarter earnings of $1.05 per share, topping consensus analyst expectations of 94 cents. Revenue for the quarter came in at $2.23 billion, down 7.8 percent from a year ago but slightly ahead of the $2.22 billion Wall Street was expecting.

Valeant cut its full-year revenue guidance from a previous range between $8.9 billion and $9.1 billion to a new range between $8.7 billion and $8.9 billion. However, the company reiterated its previous full-year adjusted earnings before interest, tax, depreciation and amortization forecast of between $3.6 billion and $3.75 billion.

Perhaps most importantly for long-term investors, Valeant continued to execute its debt reduction initiative in the second quarter. VRX has already reduced its total debt by $4.8 billion in the past five quarters. CEO Joe Papa says the company is well on its way to pay down another $5 billion in debt by February 2018 via a combination of asset sales and free cash flow from Valeant’s core businesses.

“The investments we are making in our core business are delivering results,” Papa says. “And we are continuing to reduce debt and resolve legacy issues.”

Valeant’s debt ballooned to more than $30 billion during a period of acquisition-fueled growth under the company’s previous leadership. Valeant has also been criticized for its drug pricing policies and for alleged aggressive billing practices related to its relationship with specialty pharmacy Philidor Rx Services.

After peaking at nearly $90 billion in 2015, Valeant’s market capitalization has plummeted 83 percent to less than $6 billion. VRX stock plunged from more than $250 per share in 2015 to a low of $8.31 per share in the last year.

While the stock has stabilized in recent months and investor sentiment seems to have shifted in a more positive direction, J.P. Morgan analyst Chris Schott said last month that Valeant’s stock is still a risky long-term bet.

“The recovery of Valeant’s core business remains…

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