Here's Why Endo International Is Falling Today

Shares fall even though the company posted better-than-expected results. What can explain the move?

Brian Feroldi
Brian Feroldi
Aug 6, 2019 at 10:48AM
Health Care

What happened

After reporting of second-quarter earnings, shares of Endo International (NASDAQ:ENDP), a maker of generic and branded pharmaceuticals products, were down as much as 11% in early-morning trading on Tuesday. Shares were down about 8% as of 10:37 a.m. EDT.

So what

The headline numbers from the quarter weren't as bad as you might assume from the share price move:

  • Revenue fell 2% to $699.7 million. While that's not great in absolute terms, it was slightly ahead of expectations.
  • The reported net loss almost doubled to $98 million.
  • Adjusted net income dropped 30% to $120 million, or $0.52 per share. That was also ahead of the $0.47 in adjusted EPS that Wall Street was expecting.
Businessman being punched in the face.

Image source: Getty Images.

Management also reaffirmed its full-year guidance:

  • Revenue is still expected to land between $2.76 billion and $2.96 billion. Wall Street was modeling $2.87 billion, so the midpoint is slightly below what market watchers wanted to see.
  • Adjusted diluted earnings per share from continuing operations were between $2.00 and $2.25. The midpoint of this range is also below the consensus estimate of $2.18.

Traders might be selling off the stock today because the better-than-expected quarterly results didn't lead to a guidance boost.

Now what

Endo's stock remains under a tremendous amount of pressure. Shares are currently trading hands for just over one times full-year adjusted EPS guidance. That's an absurdly cheap number, but it is telling about how little faith Wall Street has in the future of this business.

It's possible that Endo might be a value stock at these levels, but you could have made a similar argument at prices that were far higher than they are today. My view remains that this stock is too risky to touch, no matter how "cheap" the share price gets.