Mylan Inc. (MYL) is all set to announce its second quarter 2012 results before the opening bell on July 26, 2012. The Zacks Consensus Estimate for the second quarter of 2012 is 55 cents per share, representing a year-over-year estimated increase of 5.8%.
First Quarter 2012 Recap
Mylan’s first quarter 2012 earnings (excluding special items) of 52 cents per share beat the Zacks Consensus Estimate by a penny. First quarter earnings increased 18.2% from a year ago. Higher revenues and gross margin expansion led to the rise in first quarter 2012 earnings.
Revenues climbed 10% to $1.59 billion, just above the Zacks Consensus Estimate of $1.58 billion. Generics sales (after adjusting inter-segment revenues) increased 5.2% to $1.42 billion in the reported quarter. Specialty segment sales (after adjusting inter-segment revenues) increased 53.5% to $177 million.
(Read our full coverage on this earnings report: Mylan Beats, Reaffirms Outlook).
Agreement of Estimate Revisions
Estimate revisions for Mylan have been scarce over the last 30 days. Only 3 of the 15 analysts covering Mylan for the second quarter of 2012 have revised their earnings estimates. While 2 analysts have reduced estimates, 1 moved in the opposite direction. A sole analyst revised estimate downwards for fiscal 2012 over the last 30 days.
Magnitude of Estimate Revisions
The earnings estimate for the second quarter of 2012 has remained static over the last 30 days with the positive revisions canceling out the downward movements.
For fiscal 2012, a downward bias was witnessed. The Zacks Consensus Estimate for 2012 decreased by 2 cents in the last 30 days. The Zacks Consensus Estimate for 2012 currently stands at $2.48 per share, which is towards the higher end of the earnings guidance range of $2.30 to $2.50 per share provided by the company. We believe these downward revisions reflect the concerns regarding currency headwinds and pricing pressure faced by Mylan in several European markets.
Earnings Surprise
Mylan has surpassed earnings estimates in all of the last four quarters. The company recorded a maximum positive surprise of 15.56% in the second quarter of 2011. On an average, the earnings surprise was 7.84%.
Our Recommendation
We are encouraged by Mylan’s geographic reach and product depth along with a robust generic product pipeline.
However, we are concerned about the company’s lackluster performance in the Europe, Middle East and Africa (EMEA) region. Additionally, with most large branded drugs due to lose patent exclusivity in the 2017-2018 period, we have little visibility on the growth prospects of generic companies like Mylan beyond that timeframe.
Thus, we prefer to remain on the sidelines and have a Neutral recommendation on Mylan. The stock carries a Zacks #3 Rank (Hold rating) in the short term.
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