Endo CEO Retirement Dampens Earnings Beat

The news is overshadowing Endo's third-quarter earnings beat and upbeat full-year forecast

Lillian Currens
Nov 5, 2019 at 10:37 AM
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The shares of drugmaker Endo International PLC (NASDAQ:ENDP) are sliding this morning, following CEO Paul Campanelli's retirement, effective once a successor is named. This announcement has overshadowed the company's third-quarter earnings beat and upwardly revised full-year outlook, which the firm attributed to strengthening sales in its sterile injectables business. At last check, the stock is down 5.6% to trade at $4.59.

Cowen was quick to chime in, calling Campanelli one of the "most respected senior managers" in the generics industry, and noting whoever takes his place will have trouble overcoming the increasing amount of liabilities the firm is facing as one of the companies accused of sparking the U.S. opioid crisis. Analysts are already bearish on Endo, though, with 12 in coverage calling it a "hold" or worse, while only two say it's a "strong buy."

Shorts are likely cheering today's dip. While short interest has begin to peel away in recent weeks, down 6.4% in the last reporting period, the 38.1 million shares sold short still represents a solid 18.8% of the stock's available float -- almost a week's worth of trading, at ENDP's average pace. 

Some of these shorts may have initiated options hedges ahead of earnings. There has been a surprising amount of interest in long calls in the options pits of late. In fact, during the last two weeks, 11.6 calls were bought to open for every put on the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 79th percentile of its annual range, suggesting that this rate of call buying is unusual. 

Circling back to the charts, ENDP has lost roughly 36% this year, bottoming out at an all-time low of $1.97 in early September. Since then, the stock has been stair-stepping higher, finding some recent support at the $4.50 region. Just above here is the 160-day moving average, though, which has kept a lid on ENDP in recent weeks.


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