Please ensure Javascript is enabled for purposes of website accessibility

Why Mylan Stock Is Sinking Today

By Keith Speights – May 7, 2019 at 10:44AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The drugmaker's Q1 update is weighing on its share price.

What happened

Shares of Mylan (MYL) were down 17.2% as of 10:53 a.m. EDT on Tuesday. The drugmaker reported disappointing first-quarter financial results before the market opened.

Mylan posted Q1 revenue of $2.5 billion, down 7% year over year and well below analysts' consensus revenue estimate of $2.69 billion. The company had adjusted earnings per share (EPS) of $0.82, a 15% year-over-year decline. However, this EPS figure topped the Wall Street consensus estimate of $0.79.

Pills with some arranged in the shape of a dollar symbol

Image source: Getty Images.

So what

The underlying reasons behind Mylan's lower-than-expected Q1 revenue could concern investors.

The drugmaker continues to face significant headwinds in the U.S. generic market. As CEO Heather Bresch stated in the company's fourth-quarter conference call, "Value has certainly been extracted out of the U.S. marketplace." In addition, Mylan is still dealing with the fallout from issues identified by the U.S. Food and Drug Administration (FDA) at its Morgantown, West Virginia, manufacturing facility.

But while there are reasons for concern, there doesn't appear to be a reason to panic. Mylan competes internationally. More than 60% of the company's revenue comes from outside the U.S.

Granted, Mylan had some issues with its European business in the first quarter. European sales fell 14% year over year. However, 8 percentage points of that decline were caused by currency fluctuations. Much of the rest of the slide stemmed from temporary challenges -- customers' timing of purchases and the negative impact on sales from the adoption of a new system for identifying individual drug packets in Europe.

Perhaps the most important thing to keep in mind is that Mylan still expects full-year 2019 revenue between $11.5 billion and $12.5 billion. This range is in line with Wall Street expectations. And the midpoint of the revenue guidance range reflects year-over-year growth of 5%.  

Now what

Mylan now just needs to deliver on its guidance to reassure investors. The company can't change the dynamics of the U.S. generic market. However, it can and will continue to press on with new product launches. In addition, the temporary issues in Europe that weighed on sales in the first quarter should be less problematic throughout the rest of 2019.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Mylan. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Viatris Inc. Stock Quote
Viatris Inc.
MYL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.