Watson Pharmaceuticals Earnings: Double Digit Revenue Growth

S&P 500 (NYSE:SPY) component Watson Pharmaceuticals Inc. (NYSE:WPI) reported a drop to a loss in the second quarter driven by higher costs. Watson Pharmaceuticals develops, manufactures, markets, sells and distributes pharmaceutical products.

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Watson Pharmaceuticals Inc. Earnings Cheat Sheet

Results: Reported a loss of $62.2 million (49 cents per diluted share) in the quarter. Watson Pharmaceuticals Inc. had a net income of $52.7 million or 42 cents per share in the year-earlier quarter.

Revenue: Rose 25.3% to $1.36 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Watson Pharmaceuticals Inc. reported adjusted net income of $1.42 per share. By that measure, the company beat the mean estimate of $1.38 per share. Analysts were expecting revenue of $1.35 billion.

Quoting Management: “Double-digit growth of non-GAAP EPS, revenue and adjusted EBITDA resulted from solid execution across all three of our businesses,” said Paul Bisaro, President and CEO. “I’m pleased to report that at the half-way point of the year, we are executing well on our strategies to deliver on our stand-alone 2012 growth plan and to drive continued growth over the long-term.

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 41.5%, with the biggest boost coming in the first quarter when revenue rose 73.9% from the year earlier quarter.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 4 cents in the first quarter, by 2 cents in the fourth quarter of the last fiscal year, and by 4 cents in the third quarter of the last fiscal year.

The company’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $54.8 million in the first quarter, a profit of $94.8 million in the fourth quarter of the last fiscal year and $68.1 million in the third of the last fiscal year.

Gross margins widened last quarter, growing 1.1 percentage points from the year-earlier quarter to 44.4%. This ends a streak of two consecutive quarters of shrinking margins.

Looking Forward: Analysts have a more positive outlook for the company’s next-quarter performance. Over the past month, the average estimate for the third quarter has gone up from $1.35 per share to $1.36. In the past month, the average estimate for the fiscal year has fallen from $5.77 per share to $5.75.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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