Watson Pharmaceuticals Inc. Earnings: Revenue and Profit Climb

S&P 500 (NYSE:SPY) component Watson Pharmaceuticals Inc. (NYSE:WPI) reported higher profit for the fourth quarter as revenue showed growth. Watson Pharmaceuticals develops, manufactures, markets, sells and distributes pharmaceutical products.

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Watson Pharmaceuticals Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for the pharmaceutical company rose to $94.8 million (75 cents per share) vs. $18.3 million (15 cents per share) in the same quarter a year earlier. This marks a substantial increase from the year earlier quarter.

Revenue: Rose 62.1% to $1.54 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: Watson Pharmaceuticals Inc. reported adjusted net income of $1.77 per share. By that measure, the company beat the mean estimate of $1.75 per share. Analysts were expecting revenue of $1.54 billion.

Quoting Management: “2011 continued a track record of success and growth for Watson. Revenues for the fourth quarter grew by 62 percent and non-GAAP earnings per share increased by 90 percent versus 2010. Additionally, strong cash flow from operations for the year of more than $630 million enabled us to reduce our debt to adjusted EBITDA ratio to below 1.0x at year end, putting us in a strong position to continue to execute on our strategies including investments in acquisitions that provide long-term growth for the Company and its shareholders,” said Paul Bisaro, President and CEO.

Key Stats:
The company has now topped analyst estimates for the last four quarters.  It beat the mark by 4 cents in the third quarter, by one cent in the second quarter, and by 3 cents in the first quarter.

Gross margin shrank 4.1 percentage points to 42.2%. The contraction appeared to be driven by increased costs, which rose 74.6% from the year earlier quarter while revenue rose 62.1%.

Revenue has risen the past four quarters. Revenue increased 22.6% to $1.08 billion in the third quarter. The figure rose 23.6% in the second quarter from the year earlier and climbed 2.3% in the first quarter from the year-ago quarter.

Watson Pharmaceuticals has now seen net income rise in two straight quarters. In the third quarter, net income rose more than twofold from the year earlier.

Looking Forward: Analysts appear increasingly optimistic about the company’s results for the next quarter. The average estimate for the first quarter of the next fiscal year has moved up from $1.53 a share to $1.56 over the last thirty days. At $4.76 per share, the average estimate for the fiscal year has risen from $4.60 sixty days ago.

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

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To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com