Bausch + Lomb (BLCO)

Eyecare company Bausch + Lomb (NYSE:BLCO) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 3.5% year on year to $1.14 billion. On the other hand, the company’s full-year revenue guidance of $5.05 billion at the midpoint came in 1.1% above analysts’ estimates. Its non-GAAP loss of $0.15 per share was significantly below 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 $4.83 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 have short-term success, but a top-tier one grows for years. Unfortunately, Bausch + Lomb’s 5.3% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the healthcare sector and is a poor baseline for our analysis.

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 12.6% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

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 14.2% year-on-year growth. Because this number is better than its normal revenue growth, we can see that foreign exchange rates have been a headwind for Bausch + Lomb.

This quarter, Bausch + Lomb’s revenue grew by 3.5% year on year to $1.14 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.8% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will face some demand challenges.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Bausch + Lomb was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.7% was weak for a healthcare business.

Looking at 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 2.5 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.

This quarter, Bausch + Lomb generated an operating profit margin of negative 7.3%, down 7.8 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

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 28.6% annually over the last five years while its revenue grew by 5.3%. 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 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; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, Bausch + Lomb reported EPS at negative $0.15, down from $0.07 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Bausch + Lomb’s full-year EPS of $0.41 to grow 94.9%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Bausch + Lomb has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 5.4% over the last five years, slightly better than the broader healthcare sector.

Taking a step back, we can see that Bausch + Lomb’s margin dropped by 18.3 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

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 1.5%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.

Bausch + Lomb reported $0 of cash and $0 of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $824 million of EBITDA over the last 12 months, we view Bausch + Lomb’s 0.0× net-debt-to-EBITDA ratio as safe. We also see its $197 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Bausch + Lomb provide full-year revenue guidance that slightly beat analysts’ expectations, although raising full-year revenue guidance after missing on revenue often raises questions. As mentioned, the company's constant currency revenue fell short of Wall Street’s estimates, leading to an EPS miss. Overall, this quarter could have been better. The stock traded down 10.4% to $12.29 immediately after reporting.

Updated: July 10, 2025 at 12:18 AM EDT

Before investing in or passing on Bausch + Lomb, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Bausch + Lomb isn’t a terrible business, but it doesn’t pass our quality test. First off, its revenue growth was mediocre over the last five years, and analysts don’t see anything changing over the next 12 months. And while its constant currency growth has been splendid, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its cash profitability fell over the last five years.

Bausch + Lomb’s P/E ratio based on the next 12 months is 17.7x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $14.32 on the company (compared to the current share price of $14.05).