Laurentian cuts price target on Concordia International

A proposed debt offering has taken Laurentian Bank Securities analyst Joseph Walewicz by surprise and left him feeling bearish about Concordia International (Concordia International Stock Quote, Chart, News: TSX:CXR).

Yesterday, Concordia announced it intends to commence a senior note offering to raise up to $350-million. Management said the proceeds would be used to “strengthen the company’s liquidity position and augment its product development pipeline beyond the anticipated, and previously disclosed, 60 product launches, expected by the fourth quarter of 2018.”

Walewicz says this debt offering suggests forthcoming results that will be weaker than he had forecast.

“We had forecasted that CXRX had sufficient cash flows to meet its obligations, including the upcoming earn outs for the AMCo transaction. With this offering the company is signalling that it needs additional capital to meet the earn outs (£72M in Q4/16, and another ~£74M in Q1/17). We should get greater clarity about the pro forma outlook when CXR reports in a few weeks,” says the analyst, adding: “Unfortunately, we see no near term catalysts for the stock.”

In a research update to clients today, Walewicz lowered his rating on Concordia International from “Hold” to “Reduce” and cut his one-year price target on the stock from (U.S) $6.50 to $3.50.

Walewicz thinks Concordia will lose $592.6-million on revenue of $876.2-million in fiscal 2016. He expects the company’s bottom line will improve to earnings of $267.2-million on a topline of $858.1-million the following year.

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