Perrigo (PRGO): Patience Will Be Rewarded - Guggenheim

September 15, 2016 6:44 AM EDT
Get Alerts PRGO Hot Sheet
Price: $75.06 --0%

Rating Summary:
    11 Buy, 14 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 18 | Down: 12 | New: 9
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Guggenheim analyst, Louise Chen, reiterated her Buy rating on shares of Perrigo Co. (NYSE: PRGO) after meeting with management. In short, the analyst believes that the delay in turning the company around does not change the fact that PRGO has a unique set of assets that are currently undervalued. According to the analyst, management realizes it is running out of time in helping investors realize the value of those assets and answered 7 questions that were at the forefront of investors minds:

1) PRGO was a little surprised that TEVA (NYSE: TEVA) was first-to-file on store brand Nexium, but the company knew TEVA would get involved with OTC store brands which they inherited from their recent generics acquisition

2) PRGO would not comment if they have met with activist shareholder, Starboard Value, which recently took at 4.6% stake in the stock

3) PRGO noted Starboard has not suggested anything the company has not already thought about

4) It did not sound like PRGO was interested in selling its generics business, and the company made a point to note the manufacturing dissynergies to a potential buyer

5) Generic drug pricing between 7/1/16 and 8/10/16 is tracking in line with PRGO's guidance.

6) PRGO recently improved its debt covenants by ~1 turn and leverage will be below 4x by next year

7) PRGO is on track to launch Nasacort in October, which we estimate could have peak sales of $30-40MM. For context, PRGO's largest Consumer product, Prilosec, is $200MM+ in annual sales.

No change to the price target of $125.00

For an analyst ratings summary and ratings history on Perrigo Co. click here. For more ratings news on Perrigo Co. click here.

Shares of Perrigo Co. closed at $92.93 yesterday.

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Definitive Agreement, Starboard Value, Louise Chen, Guggenheim

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