Back to Neutral on Endo Health - Analyst Blog
We are reverting to a Neutral recommendation on
Endo Health Solutions
) from Underperform as we believe that the stock is fairly valued
at current levels. Our target price is $32.00. The stock carries
a Zacks Rank #3 (Hold) in the short run.
Why the Upgrade?
In Feb 2013, Endo Health reported higher- than- expected earnings in the final quarter of 2012 on the back of reduced costs. Endo Health's fourth quarter 2012 adjusted earnings of $1.62 per share beat the Zacks Consensus Estimate of $1.56.
However, the company reported lower- than- expected revenues in the final quarter of 2012, hurt by reduced sales of painkiller Opana ER. Revenues came in at $801 million, flat year over year, but well short of the Zacks Consensus Estimate of $808 million.
Endo Health maintained the guidance for 2013, issued by it in
Jan 2013. The US-based diversified healthcare company continues
to expect adjusted earnings per share for 2013 in the range of
$4.40-$4.70 per share. Our 2013 earnings estimate is well within
the guidance range provided by the company. Endo Health continues
to expect to end 2013 with revenues in the range of $2.80-$2.95
billion. We expect the entry of a generic competitor,
), for Endo Health's lead drug Lidoderm in Sep, to hurt the
latter's 2013 sales.
Moreover, Opana ER is already facing generic competition. Moreover, generic threat looms over many other key drugs at Endo Health. Patent disputes and entry of generics could weaken the company's portfolio substantially.
We believe all the negative news is already reflected in the stock price, and hence upgrade the stock to Neutral from Underperform.
Other Stocks to Consider
Favorably placed stocks in the pharma sector include Avanir Pharmaceuticals, Inc. ( AVNR ) and Shire plc ( SHPG ). Both companies carry a Zacks Rank #2 (Buy) and are worth considering.
ACTAVIS INC (ACT): Free Stock Analysis Report
AVANIR PHARM (AVNR): Free Stock Analysis Report
ENDO PHARMACEUT (ENDP): Free Stock Analysis Report
SHIRE PLC-ADR (SHPG): Free Stock Analysis Report
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