Why Bausch Health Companies Stock Skyrocketed by Almost 40% Last Month

Bausch Health Companies (NYSE: BHC) had quite a scorching July as far as its stock was concerned. It was bookended by a regulatory win in Canada for the pharmaceutical conglomerate and a beat-and-raise quarterly earnings report. This propelled the stock to a nearly 40% gain over the month.

A hot early summer

On July 6, Bausch announced that its Prokedi schizophrenia drug for adult patients had been added to the Quebec Health Insurance Board's formulary.

Image source: Getty Images.

This is critical because drug commercialization in Canada is a two-step process -- the product must first be approved by the federal government's Health Canada, then added to a province's formulary. Quebec is the first province to make such an addition with Prokedi.

The earnings report, published slightly over three weeks later, was a much stronger catalyst for the stock's rise. Bausch earned $2.85 billion in its second quarter, a sturdy 13% year-over-year improvement. It was also well over the consensus analyst estimate of $2.66 billion.

The company notched an even more impressive beat on the bottom line. Net income not under generally accepted accounting principles (non-GAAP, or adjusted) leaped 42% higher to $476 million, or $1.26 per share. Collectively, pundits tracking Bausch stock were modeling adjusted per share (EPS) of only $1.23.

All but one of the company's reporting units posted revenue growth in the quarter, with that outlier reporting flat revenue over the one-year stretch. Bausch's Salix gastroenterology (GI) and hepatology business did particularly well, rising by 21% to $758 million.

Meanwhile, the company's foundational eyecare unit, Bausch + Lomb (B+L), grew revenue by 9% to a bit over $1.39 billion.

The company made sure to note that the second quarter marked its thirteenth consecutive frame of year-over-year growth in both revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for its operations excluding B+L.

It quoted CEO Thomas Appio as saying this was indicative of "the strength of our portfolio, disciplined execution, and the dedication of our teams around the world."

Continued confidence

Management obviously thinks it'll be able to sustain this momentum, as it raised its revenue and adjusted EBITDA guidance for the entirety of 2026. It now believes its top line will be $10.79 billion to $11.04 billion; previously, it was guiding for $10.67 billion to $10.92 billion.

As for adjusted EBITDA, this is now forecast at $4.05 billion to nearly $4.18 billion for the year. That's quite an improvement over the former projection of almost $3.89 billion to $4.01 billion.

Bausch is an interesting collection of pharmaceutical assets in a range of therapeutic areas. That diversified approach is clearly working, although the eyecare business that built the company is a relative laggard these days. I like Bausch's selectiveness, and I feel its better-performing medicines still have plenty of room to grow. The market's optimism in July is understandable.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Bausch Health Companies. The Motley Fool has a disclosure policy.