Top Analyst: Bausch + Lomb (BLCO) Could be Strategic Target on Evidence of Profitability Leverage

Bausch + Lomb’s latest earnings report reflects a solid foundation of growth, bolstered by the performance of its key product lines. Despite strong revenue gains in the third quarter, questions remain over the company’s strategic direction and ability to deliver sustainable operating leverage.

Fundamentally, Bausch + Lomb has shown steady top-line performance, driven by increased momentum in several core areas. The standout contributor to revenue this quarter was Miebo, a treatment for dry eye, which has gained traction among consumers. Additionally, the rebound of Xiidra and the substantial 79 percent year-over-year growth in SiHy Dailies contact lenses further highlight the success of Bausch + Lomb’s strategy in its key markets.

These growth drivers have allowed the company to moderately raise its FY24 revenue guidance, though analysts indicate that this revision may largely reflect top-line growth rather than an uptick in organic growth. With multiple successful product launches, Bausch + Lomb’s market position appears favorable, particularly as these launches underscore the company’s ability to innovate and respond to consumer needs in the eye care sector.

However, leverage—measured here as the ability to translate revenue growth into consistent profitability—remains a more complex issue. While the company has kept FY24 EBITDA guidance intact, analyst reviews indicate that Bausch + Lomb’s EBITDA performance was mixed, landing below some expectations but slightly surpassing others.

Much of this variability is attributed to management’s focus on supporting new product launches, which, while strategically sound, has increased operational expenses and limited immediate profitability gains.

Investors and analysts alike appear to be awaiting a clearer indication of the company’s potential future moves, especially given the speculation of a possible sale.

Management has refrained from commenting on any potential deals or sales, though this anticipation adds another layer to the company’s stock story, which is increasingly focused on strategic positioning rather than operational results alone. Analysts at Stifel maintain a Hold rating, citing the need for stronger evidence of sustained above-market growth and profitability.

As Bausch + Lomb moves forward, the key test will be its ability to strike a balance between robust revenue growth and durable operating leverage. For the stock to break out of its current holding pattern, investors will be looking for signs of sustainable profitability alongside its continued top-line success.