RE:rbc report updated today at 27 us$ or over 33 $ cdnRBC clearly doesn't think this company is gong outbid business anytime soon. Please read the report before deciding to buy or sell.
quote=fundtrader]Our view: Although we had recently revised our forecasts to reflect FX impact post-Brexit and weakness in the U.S. legacy business, our revisions were not significant enough and Concordia lowered its guidance beyond the Street's expectations. We believe the weakness Friday was overdone and would be buyers, as the shares now trade at a significant discount to peers (~30% '17E EV/EBITDA discount). Key points: • Revenue Slightly Ahead of Our Expectations: Q2/16 revenues were $231.7MM vs. our forecast of $222.9MM and consensus of $231.5MM (FactSet: 6 analysts, range $222.9–238.6MM). AMCo revenues were $151.5MM vs. our $143.4MM forecast and US sales were $77.5MM vs. our $76.78MM estimate. We also note that adj. gross margins of 77.0% were slightly below our ~78.8% forecast. Adj. EBITDA was $142.3MM vs. $141.3MM consensus (FactSet: 8 analysts, range $133.3–147.9MM) and our forecast of $136.8MM. Q2 cash EPS of $1.38 was above our $1.26 estimate and in line with consensus of $1.39 (FactSet: 7 analysts, range $1.26–1.55). • Guidance Lowered Below Street Expectations; Shares See Significant Weakness. Management lowered its 2016 revenue guidance from $1.02–1.06B to $859–888MM (consensus $944MM). Adj. EBITDA guidance was also lowered, from $610–640MM to $510–540MM (consensus $579MM). Prior guidance was based on 1.53x GBP/ USD exchange rate and current guidance is based on 1.31x GBP/ USD exchange rate. Guidance was lowered to reflect competitive pressure in Donnatal and Plaquenil, genericization of Nilandron, and FX impact. Although we had reduced our forecasts ahead of Q2/16, our revisions did not account for the magnitude of the legacy weakness. Consequently, we have further revised our forecasts and our new forecasts decrease international revenues by ~$9MM in 2016E and ~ $3.5MM in 2017E. Legacy revenues decline by ~$37MM in 2016E and ~$37MM in 2017E. We believe the weakness Friday was overdone, as CXRX shares closed down ~40%, and we would be buyers, as the shares now trade at an ~30% discount to peers (2017E EV/EBITDA multiple). • Strategic Review Process, New CFO. On the Q2/16 conference call, management noted that it is in the process of reviewing one strategic alternative and that the Board is fully involved. While we have no insight into a potential outcome, we expect an update in the coming weeks/ months. We also note that EVP and Board Member Ed Borkowski will replace Adrian de Saldanha as CFO of Concordia. Mr. Borkowski has held CFO roles at Amerigen Pharmaceuticals and Mylan and we view his appointment positively. • Price Target Lowered from $33 to $27 Due to Revised Estimates Associated with Lowered Guidance.
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