Bausch + Lomb (BLCO)

Eyecare company Bausch + Lomb (NYSE:BLCO) met Wall Streets revenue expectations in Q3 CY2025, with sales up 7.1% year on year to $1.28 billion. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $5.1 billion at the midpoint. Its non-GAAP profit of $0.18 per share was 11.9% above analysts’ consensus estimates.

Company Overview

With a nearly 170-year history dedicated to vision care and eye health innovation, Bausch + Lomb (NYSE:BLCO) develops and manufactures a comprehensive range of eye health products including contact lenses, pharmaceuticals, surgical devices, and consumer eye care solutions.

The medical devices industry operates a business model that balances steady demand with significant investments in innovation and regulatory compliance. The industry benefits from recurring revenue streams tied to consumables, maintenance services, and incremental upgrades to the latest technologies, although specialty devices are more niche. The capital-intensive nature of product development, coupled with lengthy regulatory pathways and the need for clinical validation, can weigh on profitability and timelines. In addition, there are constant pricing pressures from healthcare systems and insurers maximizing cost efficiency. Over the next several years, one tailwind is demographic–aging populations means rising chronic disease rates that drive greater demand for medical interventions and monitoring solutions. Advances in digital health, such as remote patient monitoring and smart devices, are also expected to unlock new demand by shortening upgrade cycles. On the other hand, the industry faces headwinds from pricing and reimbursement pressures as healthcare providers increasingly adopt value-based care models. Additionally, the integration of cybersecurity for connected devices adds further risk and complexity for device manufacturers.

Bausch + Lomb competes with several major eye health companies including Johnson & Johnson Vision (NYSE:JNJ), Alcon (NYSE:ALC), and Cooper Companies (NYSE:COO) in the contact lens and surgical markets. In pharmaceuticals, it faces competition from Novartis (NYSE:NVS), Regeneron (NASDAQ:REGN), and AbbVie's Allergan (NYSE:ABBV). The consumer eye care segment competes with Prestige Consumer Healthcare (NASDAQ:PBH) and private label brands.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $4.98 billion in revenue over the past 12 months, Bausch + Lomb has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Bausch + Lomb grew its sales at a decent 7.7% compounded annual growth rate. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Bausch + Lomb’s annualized revenue growth of 12% over the last two years is above its five-year trend, suggesting some bright spots.

Bausch + Lomb also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 13% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Bausch + Lomb has properly hedged its foreign currency exposure.

This quarter, Bausch + Lomb grew its revenue by 7.1% year on year, and its $1.28 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.8% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is above average for the sector and suggests the market is baking in some success for its newer products and services.

Bausch + Lomb was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.4% was weak for a healthcare business.

Analyzing the trend in its profitability, Bausch + Lomb’s operating margin decreased by 7.2 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 1.6 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

In Q3, Bausch + Lomb generated an operating margin profit margin of 7.4%, up 3.8 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Bausch + Lomb, its EPS declined by 20.4% annually over the last five years while its revenue grew by 7.7%. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Bausch + Lomb’s earnings to better understand the drivers of its performance. As we mentioned earlier, Bausch + Lomb’s operating margin expanded this quarter but declined by 7.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Bausch + Lomb reported adjusted EPS of $0.18, in line with the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Bausch + Lomb’s full-year EPS of $0.43 to grow 97.2%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Bausch + Lomb has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.4%, subpar for a healthcare business.

Taking a step back, we can see that Bausch + Lomb’s margin dropped by 29.3 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Bausch + Lomb historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 1.4%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Bausch + Lomb’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Bausch + Lomb burned through $40.99 million of cash over the last year, and its $4.95 billion of debt exceeds the $467.6 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Bausch + Lomb’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Bausch + Lomb until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

It was good to see Bausch + Lomb beat analysts’ EPS expectations this quarter. We were also glad its full-year EBITDA guidance exceeded Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 8.6% to $16.49 immediately after reporting.

Updated: December 3, 2025 at 10:50 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Bausch + Lomb isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was decent over the last five years and Wall Street believes it will continue to grow, its declining EPS over the last five years makes it a less attractive asset to the public markets. And while the company’s constant currency growth has been splendid, the downside is its cash profitability fell over the last five years.

Bausch + Lomb’s P/E ratio based on the next 12 months is 20.2x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $16.63 on the company (compared to the current share price of $17.00), implying they don’t see much short-term potential in Bausch + Lomb.