Impax (IPXL) Up 35.3% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Impax Laboratories, Inc. IPXL. Shares have added about 35.3% in that time frame, outperforming the market.

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

Impax Q4 Earnings in Line, Revenues Miss Estimates

Impax  posted fourth-quarter 2016 adjusted earnings of $0.16 per share, in line with the Zacks Consensus Estimate. Earnings were also down 74.2% from $0.62 in the year-ago period due to lower generic product sales.

Total revenue decreased 29.7% to $198.4 million year over year, due to increased competition and lower pricing on generic diclofenac sodium gel 3%, metaxalone, fenofibrate and mixed amphetamine salts ER.
Moreover, revenues were well below the Zacks Consensus Estimate of $220 million in the reported quarter.

Quarter in Detail

During the reported quarter, Impax Generic division revenues declined 38.6% from the year-ago quarter to $139.2 million. The decline in revenues was due to decreased sales of diclofenac gel, metaxalone, fenofibrate and mixed amphetamine salts ER as a result of increased competition and pricing pressure.

The Impax Specialty Pharma division recorded revenues of $59.2 million, up 7.1% year over year, largely due to higher sales of Rytary and Albenza, and the addition of sales from the March 2016 launch of Emverm. Adjusted research and development (R&D) expenses grew 2.8% to $19.9 million in the reported quarter.

Adjusted selling, general and administrative expenses (SG&A) decreased 5.8% to $49.9 million.

2016 Results

For the full year 2016, adjusted earnings were $1.16 per share compared with $1.45 in 2015. Earnings were in line with the Zacks Consensus Estimate.

Revenues for 2016 came in at $824.4 million, down 4.2% from $860.5 million in 2015. Revenues missed the Zacks Consensus Estimate of $846.02 million.

2017 Outlook

Impax’s full year 2017 outlook reflects management's current expectations with respect to prescription trends, pricing and inventory levels, and the anticipated timing of future product launches and events.

The company did not provide 2017 guidance estimates for total revenues or earnings per share due to ongoing revenue volatility within the company's Generics division as a result of increased competition and the continued impact of lower pricing.  

As a result of these events and excluding the impact from significant new product approvals and launches expected in 2017, the company expects its

Generics division revenues to decline in 2017 compared to 2016.
The pricing erosion is expected to be in the high single to low double-digit range in 2017.

The company expects gross margins to be about 47% to 49%.

Adjusted research and development expenses, including patent litigation expenses, across the generic and brand divisions of are forecast to be in the range of $90 million to $95 million.

Adjusted selling, general and administrative expenses are expected to be in the range of $190 million to $195 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted lower by 53.5% due to these changes.

Impax Laboratories, Inc. Price and Consensus

 

Impax Laboratories, Inc. Price and Consensus | Impax Laboratories, Inc. Quote

VGM Scores

At this time, Impax's stock has a poor Growth Score of 'F', however its Momentum is doing a bit better with a 'D'. Charting a similar path, the stock was allocated a grade of 'D' on the value side, putting it in the lower 40% for this investment strategy.

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

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are looking for a below average return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Impax Laboratories, Inc. (IPXL): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research