Mizuho Updates Ests on Mallinckrodt (MNK) Amid EpiPen Headlines; Affirms at 'Buy'

August 26, 2016 7:51 AM EDT
Get Alerts MNK Hot Sheet
Price: $46.41 +1.69%

Rating Summary:
    17 Buy, 4 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 18 | Down: 19 | New: 11
Trade MNK Now!
Join SI Premium – FREE

Get access to the best calls on Wall Street with StreetInsider.com's Ratings Insider Elite. Get your Free Trial here.

Mizuho is updating estimates on Mallinckrodt (Nasdaq: MNK) following recent EpiPen news. The firm rates Mallinckrodt at Buy with a price target of $91.

The firm commented, MNK announced an agreement to divest its nuclear imaging business to IBA Molecular for total consideration of $690M, consisting of $574M cash, $77M contingent consideration, and $39M for assumption of long-term obligations (~1.7x sales). Management indicated it will classify the business as discontinued operations beginning 3Q:CY16 and expects the deal to close in 1H:CY17. We expect this deal to improve future operating margins, but are modeling dilution of $0.92 to CY:16 and $0.37 to CY:17 as we strip out all historical and forward-looking revenue and estimated expenses associated with this segment. The company plans to provide full restated historical figures in October.

On estimates: We expanded our model to include the calendar year quarters for 2017. Based on our discussion with mgmt, we estimate 60% gross margins for the discontinued imaging business, with ~$40M/quarter in related SG&A spend. Of this amount we kept ~$10M per quarter in the model for "reallocated costs". We also added $574M to our cash balance and slightly declined the Depreciation and Stock-Based Comp in our DCF model. We also added the Stratagraft product from MNK's recent Stratatech acquisition, with 2020 entry and a 60% risk adjustment.

For an analyst ratings summary and ratings history on Mallinckrodt plc click here. For more ratings news on Mallinckrodt plc click here.

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In

Related Categories

Analyst Comments

Related Entities

Definitive Agreement

Add Your Comment