Earnings Miss Hurts Vertex Pharmaceuticals (NASDAQ:VRTX), But Don't Count It Out

When it comes to figuring out how well a stock really did in a quarter, some like to look at raw numbers. Others, meanwhile, look to how well a company did against consensus estimates. Sometimes these numbers can actually end up at loggerheads, with a company posting solid numbers, just not numbers that were solid enough to beat stated estimates. That's recently what happened to Vertex Pharmaceuticals (NASDAQ:VRTX), who showed that a good quarter sometimes isn't good enough.

A Swing, a Hit, but Ultimately a Miss

Vertex came out with numbers that should have been solid enough for anyone; the company posted quarterly earnings of $2.51 per share. The problem, however, was that this otherwise-impressive gain lagged the Zacks consensus by about $0.14, as it came in at $2.65 per share. Perhaps even more galling for Vertex is that the $2.51 compares marvelously to the figures from the same time a year ago; that figure came in at $1.70 per share. Though admittedly, this likely came as a nasty shock to the company as a whole; reports noted that, over the last year, the company has beaten earnings estimates three times already, making this the first quarter in a year when such a beat didn't arrive.

The company did manage to turn in a beat on revenue, though, which came in at $1.63 billion for the quarter. That actually beat estimates by nearly 3%, and also compared favorably against the same time the preceding year, where the company brought in $1.41 billion.

The biggest leader for Vertex was its cystic fibrosis operations, as the company's efforts on that front target those with particular mutations in cystic fibrosis conditions. The company has several medications that target that disease, and reports suggest more are in the making.

Analysts Don't Let the Dip Get To Them

Looking at the broader analyst pool, as based on our latest research, shows a company that's only more of a buy with each passing interval.

The consensus rating for Vertex is a “buy”, as it has been for the last six months, and the ratios comprising that rating have only improved over the same time frame. Six months ago, the company had eight “hold” ratings, 20 “buy”, and one “strong buy.” Three months ago, the company picked up a new “buy” rating. A month ago, the ratios really shifted to six “hold”, 24 “buy”, and one “strong buy.” Now, we stand at five “hold”, 22 “buy” and one “strong buy”, demonstrating increasingly bullish sentiment.

The price target, meanwhile, has been in a slow decline for the same period, until very recently. Six months ago, it started at $295.81. Three months later, it fell to $291.14. A month ago, it fell once again to $289.47 before jumping up to its second-highest total of the last six months, $292.50. This price target also represents the highest level of upside potential the stock has seen in the last six months.

No One-Trick Pony Here

It would be easy to dismiss Vertex out of hand as a too-focused operation, leaning toward cystic fibrosis treatments. Indeed, the company has taken a hit on that front as recent testing on its AATD—alpha-1 antitrypsin deficiency—operations were quite a bit less than what was expected.

There were also some notes that the major cystic fibrosis drugs were seeing some sales issues. One of its leaders, Orkambi, lost 20% against the same time last year, and Kalydeco wasn't much better, having lost 18%. The worst loss came from Symdeko / Symkevi, which lost 61% against last year's figures. All of this sounds a lot worse than it is, however, as the latest option on this front, Trikafta / Kaftrio, pulled in $1.1 billion by itself for the quarter, an increase of 160%.

With research and development costs reportedly down 3% against this time last year, that's a little bit more good news, though of a double-edged variety. Lower R&D costs mean less expense, but also a lowered chance of finding the next big breakout sales candidate. Worse, the company's other costs—sales, general and administrative particularly—were up 8%, which took the gains from reduced R&D off the table.

However, there are positive points in the pipeline. The company is reportedly set to launch new studies tackling other diseases, including type 1 diabetes and APOL1-mediated focal segmental glomerulosclerosis. Successes on these fronts could be a real powerhouse in the making for Vertex. The company hopes for FDA approval to treat children with Trikafta by mid-June.

In the end, those who get involved with Vertex need to be ready for a long-term proposition. The company already has some solid results, though these may not be always the results investors might prefer. Those who treat the recent declines as an opportunity to get on board may have the right of it, though it will take a lot of time to find out just how right.