Eye-Care Shares Hit by Bausch & Lomb Profit Warning
Shares of eye-care companies were blindsided Thursday after Bausch & Lomb Inc. warned of weaker earnings and revenue through next year, fired a top executive and said demand for lens-care products had slowed.
The stock price of the Rochester, N.Y., maker of contact lenses and other optical products plummeted 36% on the news. Other firms, some of which reported better results, also suffered.
The whole eye-care sector took a hit on the news. Contact lens maker Cooper Cos. Inc. in Lake Forest fell $3.50 to close at $29.25 on the New Yok Stock Exchange, even as the company said it expects third-quarter results to be in line with analysts’ expectations and revenue to grow 17%.
Allergan Inc., the Irvine eye- and skin-care company that a month ago reported a $15.1-million quarterly loss, dropped $3.81 to close at $66.50, also on the Big Board.
Even shares of industry giant Johnson & Johnson in New Brunswick, N.J., which makes a range of health-care products that includes contact lenses, slipped 69 cents to close at $96.25.
Investor confidence in Bausch & Lomb has diminished sharply since July, when the company posted disappointing second-quarter results. The stock fell more than 45% from a 52-week high of $80.88 to close Wednesday at $55.75.
Bausch & Lomb said it fired Carl Sassano, president and chief operating officer and a 25-year veteran of the company, and abolished those two executive positions.
Chairman and Chief Executive William Carpenter said the earnings shortfall drove him to “remove a layer of management, bringing me in even closer touch with the day-to-day activities of the business.”
The company blamed the expected weakness on lower-than-anticipated demand for contact lens-care items, problems meeting demand for surgical intraocular lenses, competition in the market for hearing products and the weakened value of the euro.
Bausch & Lomb said it now expects earnings of $2.69 to $2.74 a share for the year, including an acquisition last month, well below the $3.15 average forecast by analysts, according to First Call/Thomson Financial.
Revenue for the full year is likely to be flat or down from the previous year, excluding the acquisition, but up by 2% to 4% with the acquisition, Bausch & Lomb said.
“To say that I find these results unacceptable would be a gross understatement,” Carpenter said in a conference call. “We can and we will improve our 2001 results over these projections.”
Carpenter said his goal is to generate 15% earnings growth over the next few years, and the firm will release a performance update no later than when the third-quarter results are posted. He added that the company is undertaking a review of how it is structured and managed.
The warning sent the company’s stock reeling, down $19.88, to close at $35.88 on the New York Stock Exchange, and sliced off more than $1 billion in market value.
“This is a blindside. This is [like] walking across the street and getting hit by a Mack truck,” said analyst Lawrence Keusch of Goldman Sachs. “Four weeks ago, the company was suggesting that these issues were temporary in nature. We’ve certainly known there has been weakness in lens-care solutions . . . but the magnitude of the declines in earnings expectations is troubling.”
