Wells Fargo maintains Bausch & Lomb stock with $15 target

On Tuesday, Wells Fargo (NYSE:WFC) reiterated its Equal Weight rating and a $15.00 price target for Bausch & Lomb Corporation (NYSE:BLCO) shares. The Wells Fargo analyst highlighted the company’s prompt resolution of the enVista intraocular lenses (IOLs) recall issue, with a relaunch expected to commence in late Q2. Bausch & Lomb had voluntarily recalled the product less than a month prior due to Toxic Anterior Segment Syndrome (TASS) concerns linked to a raw material from an alternate vendor, who has since been replaced.

The analyst noted that the pace of the enVista relaunch would be critical, with a commercial ramp-up anticipated through Q3 and Q4, and a forecast for revenue to approach nearly pre-recall levels by 2026. While the company has maintained strong revenue growth of 15.56% in the last twelve months, reaching $4.79 billion, InvestingPro data shows it operates with significant debt of $4.94 billion and has not been profitable over the last twelve months. Despite the recall’s short duration, Wells Fargo expects a revenue impact for 2025, along with increased costs for resolving the issue, inventory rebuilding, and the relaunch process. The revised estimates now include the enVista product starting from Q2, assuming a return to 90% of pre-recall revenue by mid-2026.

The analysis also considered the potential impact of tariffs, particularly concerning Bausch & Lomb’s operations in China, which account for approximately 15% of the company’s sales and a similar proportion of its manufacturing space. While most of Bausch & Lomb’s surgical products are manufactured in the United States, contact lens production is divided between the U.S. and Ireland. The potential tariffs, as assessed on April 11, could disproportionately affect Bausch & Lomb compared to its peers due to its modest earnings per share (EPS) base. The exact effect of tariffs on pharmaceutical sales, which represent about 25% of the company’s total sales, remains uncertain.

Wells Fargo forecasts 2025 sales and EBITDA at $4.97 billion and $886 million, respectively, which is slightly below the company’s guidance of $4.95-$5.05 billion in sales and $900-$950 million in EBITDA, as well as below the consensus of $5.0 billion in sales and $916 million in EBITDA. Despite current challenges, InvestingPro analysis indicates a positive outlook, with analysts expecting profitability this year and an EPS forecast of $0.66 for 2025. The company maintains a "GOOD" overall Financial Health score, supported by a solid gross profit margin of 60.93%. For deeper insights into BLCO’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. These projections do not account for the potential negative effects of tariffs, which could reduce gross and EBITDA margins by 50-70 basis points. However, foreign exchange (FX) rates are expected to provide a tailwind of approximately $100 million, potentially mitigating some of the impacts from the enVista recall but unlikely to fully offset the tariff headwinds. Consequently, Bausch & Lomb may maintain or raise its reported sales guidance but could lower its guidance for ex-FX growth and EBITDA due to the combined effects of tariffs and recall costs.

In other recent news, Bausch + Lomb Corporation has resumed production of its enVista intraocular lenses following a voluntary recall. The recall was linked to cases of toxic anterior segment syndrome, traced to a raw material from an alternate vendor. The company has since enhanced its inspection protocols and shared findings with regulatory authorities. Fitch Ratings upgraded Bausch + Lomb’s Issuer Default Rating from ’B-’ to ’B’, reflecting improved financial performance and recent strategic acquisitions, such as Novartis (SIX:NOVN)’ ocular surface pharmaceuticals portfolio. RBC Capital Markets adjusted its price target for Bausch + Lomb to $17, maintaining an Outperform rating, while anticipating Q1 revenue of approximately $1,150 million. Stifel analysts lowered their price target to $15, maintaining a Hold rating, citing a more positive response from doctors regarding the recalled intraocular lenses. Wells Fargo downgraded Bausch + Lomb’s stock from Overweight to Equal Weight, reducing the price target to $15, due to uncertainties surrounding the enVista recall. These developments highlight ongoing challenges and progress for Bausch + Lomb in the eye care market.

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