Mylan (MYL) Up 13.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Mylan (MYL). Shares have added about 13.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mylan due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Mylan Beats on Q1 Earnings

Mylan reported adjusted earnings of 90 cents per share in the first quarter of 2020, beating the Zacks Consensus Estimate of 88 cents. Also, the reported figure improved from the year-ago quarter’s 82 cents.

However, quarterly revenues of $2.62 billion missed the Zacks Consensus Estimate of $2.67 billion. Nevertheless, revenues increased 5% reportedly and 8% at constant exchange rate (“CER”) from the prior-year quarter. Overall volume growth in the reported quarter was favorably impacted by increased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic, primarily in the Europe segment.

Quarter in Detail

The company posts results in three segments on a geographic basis — North America, Europe and the Rest of the World.

The North America segment’s net sales came in at $955.5 million, up 4% year over year. This increase was primarily driven by higher volumes on existing products and partially due to new product sales.  The higher volumes were primarily driven by the expected growth of Yupelri and Wixela.

Net sales in the Europe segment came in at $1.02 billion, up 14% year on year. This upswing primarily resulted from higher net sales of existing products, as a result of increased volumes, and partly from new product sales. In addition to the estimated impact of COVID-19, volumes increased approximately $40.0 million due to the resolution of supply disruptions encountered in the prior-year quarter.

The Rest of the World segment’s net sales of $610.8 million were down 5% due to the unfavorable impact of foreign currency translation and the negative impact from COVID-19 in China and Japan.  In addition, net sales of existing products were affected by lower pricing, primarily driven by government price cuts in Australia and Japan.

Adjusted gross margin of 53% declined from the year-ago quarter’s 54%.

2020 Guidance Reiterated

Mylan reiterated its previously-provided guidance after absorbing approximately $200 million of foreign exchange headwinds. Revenues are projected between $11.5 billion and $12.5 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Mylan has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Mylan has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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