One of my biggest beefs with Capital One is the bank’s overwhelming reliance on its credit division to drive results. Because of this reliance, it’ll boast net interest margins that are usually twice as high as the nation’s largest money center banks, but it will also be quickly affected by negative shifts in credit card delinquency trends and a slowdown in consumer spending. With a forecast that calls for little revenue growth in 2013, I’d just as soon avoid Capital One altogether.
Forest Laboratories, Inc. (NYSE:FRX)
Yuck! That’s both my technical and professional opinion on Forest Lab’s third-quarter results.
We already knew things would be bad given the loss of Lexapro, its lead antidepressant, to patent expiration, but we didn’t know it’d be this bad! Sales of the drug were ransacked by generic competition, falling to just $20.3 million from $593 million in the year-ago period. In total, even with many of its other drugs seeing a rise in sales, revenue plummeted 41.6%. Namenda, which is slated to lose patent protection in 2015, saw a sales increase of just 1.6% to $345.8 million and also missed Wall Street’s expectations.
Among the carnage, there were a few bright spots, including two new drugs that may begin to make up for some of Lexapro’s lost revenue. One, which I highlighted in December, is Linzess, an irritable bowel syndrome and constipation drug developed with Ironwood Pharmaceuticals. Sales of the drug, which only came to market in December, have totaled $19.2 million — a great start in my book. Tudorza, Forest’s inhaled COPD treatment, also launched in December, bringing in $12.2 million.
Still, with generics threatening to eat up another $300 million-plus in revenue from Namenda in just two years, I’d take these warning signs from Forest Labs and throw the yellow caution tape around this company until further notice.
Foolish roundup
Sometimes an earnings beat or miss isn’t as cut-and-dried as it appears. I’ve given my two cents on what’s next for each of these companies — now it’s your turn to sound off. Share your thoughts in the comments section below and consider adding these stocks to your free and personalized Watchlist.
- Add Goldman Sachs to My Watchlist.
- Add Capital One Financial to My Watchlist.
- Add Forest Laboratories to My Watchlist.
Is this the greatest deal in the banking sector?
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The article 3 Earnings Reports That Caught My Attention Last Week originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Motley Fool newsletter services have recommended buying shares of Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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