On Sep 19, we maintained our Neutral recommendation on
). The company delivered a positive earnings surprise in the
final quarter of fiscal 2013 (ended June 29, 2013) - its fourth
straight earnings surprise. Our investment thesis is supported by
a Zacks Rank #3 (Hold).
Why the Reiteration?
On Aug 15, Perrigo reported higher-than-expected earnings in the
fourth quarter of fiscal 2013. Net sales in the quarter climbed
16.3% to $967.2 million. Revenues, however, missed the Zacks
consensus Estimate mainly due to soft Consumer HealthCare sales.
Reduced sales of gastro and analgesic products contributed to
Perrigo's Rx Pharmaceuticals segment performed encouragingly
during the quarter with segmental net sales improving 24% to $195
million. We are impressed by the series of launches at the Rx
Pharmaceuticals segment of Perrigo.
We are impressed by Perrigo's strong pipeline. Perrigo expects to
launch more than 75 new products in fiscal 2014 contributing
approximately $190 million to fiscal 2014 revenues. The company
expects revenues in fiscal 2014 to increase in the range of
12%-16% over fiscal 2013 levels. The projection excludes the
impact of Perrigo's impending acquisition of
The cash and stock deal ($8.6 billion), cleared by the boards of
directors of both the companies, is expected to close by the end
of calendar year 2013. On completion of the deal, Perrigo's
revenue stream would be boosted as it will receive significant
royalties on multiple sclerosis drug Tysabri from
Biogen Idec Inc.
). Management expects Elan's acquisition, on closure, to boost
the standalone Perrigo's fiscal 2014 adjusted earnings by at
least $0.10 per share. Fiscal 2015 adjusted earnings are expected
to be boosted by $0.70-$0.80 per share, including synergies.
We expect investor focus to remain on updates of the deal. We
prefer to remain on the sidelines until the acquisition
Another stock that warrants a look
While we expect Perrigo to perform in line with its peers and
industry levels in the coming months and advice investors to wait
for a better entry point before accumulating shares, one can look
Gilead Sciences Inc.
) as a good buying opportunity. Gilead, sporting a Zacks Rank #1
(Strong Buy), has been performing encouragingly and the stock
price has significant scope for appreciation.
BIOGEN IDEC INC (BIIB): Free Stock Analysis
ELAN CP PLC ADR (ELN): Free Stock Analysis
GILEAD SCIENCES (GILD): Free Stock Analysis
PERRIGO COMPANY (PRGO): Free Stock Analysis
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