Please ensure Javascript is enabled for purposes of website accessibility

Why Mallinckrodt Stock Is Soaring Today

By Keith Speights - Nov 4, 2019 at 12:07PM

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

Investors appear to be optimistic about the drugmaker's impending Q3 update.

What happened

Shares of Mallinckrodt (MNK) are soaring today, up 12.1% as of 11:30 a.m. EST. This big jump seems to stem from investors' anticipation of better-than-expected results when the drugmaker reports its third-quarter update tomorrow morning, as well as general stock market optimism.

So what

Buying any stock based on a gut feeling for how the company's next quarterly results will turn out isn't a good idea. You might be right, but you could just as easily be wrong. The more important thing to focus on is a company's business prospects.

Businessman holding a red line that was trending down and then trended back up

Image source: Getty Images.

For Mallinckrodt, those prospects hinge largely on what happens with ongoing opioid-related litigation. The company reached a settlement with two Ohio counties, agreeing to pay $24 million in cash, cover $500,000 for the counties' time and expenses related to the lawsuits, and provide $6 million worth of generic products to the counties. However, many other opioid lawsuits remain unsettled. 

As for Mallinckrodt's Q3 results that will be announced on Tuesday, investors do have some reason to be cautiously optimistic. In the second quarter, the company upped its full-year 2019 guidance for adjusted earnings per share. 

Now what

Investing in stocks, in general, involves plenty of uncertainty. But with Mallinckrodt, the level of uncertainty is unusually high. Depending on what happens with the opioid lawsuits, the company could face an existential crisis or it could emerge in a position to deliver long-term growth. Despite today's nice gains, investors should remain very cautious with all the stocks of companies that focus heavily on the opioid market, including Mallinckrodt.

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

Mallinckrodt Public Limited Company Stock Quote
Mallinckrodt Public Limited Company

*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 service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

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.