Wall Street Horizon Blog

Valeant Stock Plummets on Earnings Announcement . . . Who Didn't See This Coming?

Posted by Eric Soderberg on Mar 16, 2016 8:26:04 AM

If you are looking for a good case study to support the research that says bad news is on the way when a company delays a scheduled earnings date, look no further than what happened to Valeant Pharmaceuticals yesterday.

If you have been following Valeant, you know that the past six months for the company has been brutal.  US Senate investigations into price gouging, accusations of fraud, lawsuits for insider trading, restatements of 2014 earnings, the hospitalization of the company's CEO, shall I continue?

Valeant stock during this period has gone from $240/share to $69/share at the end of the day Monday.  On February 22nd (A) the company announced that it would be hosting a conference call one week later, on Monday, February 29th at 8:00am, to discuss its unaudited Q4 financial results and provide a business update.  On 7:30pm on Sunday, February 28th (B) however, about 12 hours ahead of the call, the company announced the return of its CEO J. Michael Pearson, "effective immediately", the prompt cancellation of the conference call and the withdrawal of its prior financial guidance.  RED FLAG!

On March 7, Valeant issued another press release announcing its plans to host its Q4 conference call on March 15th at 8:00am (C).  In the announcement, CEO Pearson stated that his "first day back to work" was February 29th . . . I'm guessing this was a typo and he meant to say February 28th, the day he made the decision to cancel the earnings call.

Valeant_Chart_3_15_16_c.png


I believe there were many investors and traders who were able to read the tea leaves on the day the earnings call was canceled (probably WSH blog readers) and immediately dumped the stock.  Unfortunately, it seems many more hung in there and got blindsided with the results they heard from Valeant yesterday morning.  The company cut its 2016 revenue forecast by about 12%, lowered its earnings guidance for Q1 and said a delay in filing its annual report could pose a debt default risk.

Maybe the next six months will be a bit better for Valeant.  Stay tuned for when they announce their next earnings date and keep your finger on the SELL button the night before the call just in case they make another last minute postponement.

 

 

 

 

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