The short attack by Citron Research has made shares of Questcor Pharmaceuticals (QCOR) attractively priced just before its earnings release on Tuesday, July 24th, after the close. Supposedly, Citron stated that QCOR's revenue and earnings growth can't last due to a generic version available in Europe. As I have stated before, just because a generic version is offered elsewhere does not mean it will be offered in the United States. There are different rules and regulations for different parts of the world. A generic drug offered in Europe still needs to go through the FDA to be released in the U.S. And the FDA currently has no guidelines for generic biotech drugs, so the generic version won't be showing up here anytime soon.
But I want to show that mathematically, QCOR should beat earnings. The chart below shows data provided from their earning press releases plus 2nd and 3rd quarter earnings estimates:
Revenue - Quarterly Results (in $Millions) | Earnings Per Share - Quarterly Results | ||||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||
1st | 95.97 | 36.83 | 26.24 | 1st | 0.58 | 0.20 | 0.13 |
2nd | 108.91 | 45.98 | 28.32 | 2nd | 0.63 | 0.23 | 0.14 |
3rd | 119.90 | 59.82 | 31.27 | 3rd | 0.70 | 0.37 | 0.18 |
4th | 75.54 | 29.30 | 4th | 0.47 | 0.12 | ||
The chart below shows calculations for the growth from prior quarters with earning estimates placed for the 2nd and 3rd quarters of 2012:
Revenue - Quarterly Results (in $Millions) | Earnings Per Share - Quarterly Results | ||||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||
1-2 | 12.94 | 9.15 | 2.08 | 1-2 | 0.05 | 0.03 | 0.01 |
2-3 | 10.99 | 13.84 | 2.95 | 2-3 | 0.07 | 0.14 | 0.04 |
3-4 | 15.72 | -1.97 | 3-4 | 0.10 | -0.06 | ||
Converting to a percentage:
Revenue - Quarterly Results | Earnings Per Share - Quarterly Results | ||||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||
1-2 | 13.48% | 24.84% | 2.08% | 1-2 | 8.62% | 15.00% | 7.69% |
2-3 | 10.09% | 30.10% | 2.95% | 2-3 | 11.11% | 60.87% | 28.57% |
3-4 | 26.27% | -1.97% | 3-4 | 27.03% | 33.33% | ||
Thus, analysts expect revenue percentage growth from the previous quarter to suddenly fall from the high twenties to the low teens. Seems to me they are expecting a slowdown, similar to Citron's report. Same is seen in earnings growth from previous quarter.
The chart below shows calculations for the growth from prior years with earning estimates placed for the 2nd and 3rd quarters of 2012:
Revenue - Quarterly Results (in $Millions) | Earnings Per Share - Quarterly Results | ||||
2011 to 2012 | 2010 to 2011 | 2011 to 2012 | 2010 to 2011 | ||
1st Qrt | 59.1 (161%) | 10.6 (40%) | 1st Qrt | 0.38 (190%) | 0.07 (54%) |
2nd Qrt | 62.9 (137%) | 17.7 (62%) | 2nd Qrt | 0.40 (174%) | 0.09 (64%) |
3rd Qrt | 60.1 (100%) | 28.6 (91%) | 3rd Qrt | 0.33 (89%) | 0.19 (106%) |
4th Qrt | 46.2 (158%) | 4th Qrt | 0.35 (292%) | ||
Analysts seem to also think year-over-year revenue and earnings will slow. Thus, mathematically and statistically, revenue should easily beat expectations, while earnings should meet or beat expectations.
Disclosure: I am long QCOR.
