Forest Labs Earnings: Here’s Why Investors Are Booking Profits

Forest Laboratories Inc. (NYSE:FRX) reported a loss and missed Wall Street’s expectations, coming up short on the revenue analyst estimate. The revenue miss is a negative sign to shareholders top-line growth out of Forest Labs. Shares are down 4.65%.

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Forest Laboratories Inc. Earnings Cheat Sheet

Results: Net income decreased to a loss of $153.6 million (loss of 58 cents per diluted share) in the quarter versus a net gain of $278.44 million in the year-earlier quarter.

Revenue: Decreased 40.24% to $722.7 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Forest Laboratories Inc. reported adjusted net loss of 21 cents per share. By that measure, the company missed the mean analyst estimate of a loss of 14 cents per share. It missed the average revenue estimate of $761.95 million.

Quoting Management: “The launch of every product requires major effort. It is costly financially and in human effort, and two in one quarter is especially demanding. Each involves sales force training and each involves a costly launch meeting with additional training and motivational presentations involving nearly two thousand sales and marketing personnel at each meeting. Most of those expenses were incurred in the last quarter for both products, including increased production costs for launch quantities, which were not compensated by initial stocking sales. Our marketing department and sales force membership and management exceeded even their usual impressive performance. It always takes a little while for the expense dust to clear, and to see the sales and profits generated by each new product…” said Howard Solomon, Chairman and CEO of Forest Labs.

Key Stats:

Revenue decreased 4.99% from $760.64 million in the previous quarter. Net income increased 639.17% from $20.78 million in the previous quarter.

Looking Forward: Analysts have a more negative outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings has fallen from a profit of $0.31 to a profit $0.13. For the current year, the average estimate has moved down from a profit of $0.66 to a profit of $0.25 over the last ninety days.

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(Company fundamentals provided by Xignite Financials.)