Valeant Pharmaceuticals (VRX) Named Top Pick for 2015 at BMO Capital

BMO Capital analyst Alex Arfaei named Valeant Pharmaceuticals (NYSE: VRX) his Top Pick for 2015. The analyst reiterated an Outperform rating and price target of $176 as they see strong quarters ahead after a tough 2014.

Arfaei commented, "2014 was a challenging year for Valeant. Nonetheless, VRX is up 19% YTD and there are many signs that it will have a very strong 4Q14 and 2015. We forecast 4Q revenues of $2.3Bn, at the top end of guidance, despite our estimated $74MM Fx headwind driven in part by the weaker Russian Ruble (accounts for 4-5% of revenues). We forecast 4Q EPS of $2.49, in the mid-range of guidance despite our estimated $0.10 Fx headwind (guidance was $0.06); if it wasn’t for Fx, Valeant would have most likely exceeded its 4Q guidance by about $0.05. We could be conservative with our 4Q14 EPS forecast given the potential for lower OPEX. Overall, we see low risk of Valeant missing 4Q14 Street estimates; it will likely beat the Street’s revenue forecast by ~3%, and meet or beat consensus EPS of $2.49. The strong top-line performance will likely be driven by the US businesses, particularly dermatology and consumer care. As for the 2015 guidance, we believe that Valeant’s previous 2015 guidance is beatable despite recent Fx headwinds. There may be room for raising it based on the recent launches. With most of the generic impact in 2014 already behind us, and no significant loss of exclusivities expected until mid-2015, we believe that Valeant is poised to deliver 2-3 very strong quarters driven by double-digit growth in the US and EM. If Valeant does not raise debt for new deals, we see leverage (net debt/TTM EBITDA) going down from 5.6x in 2013 to 3.6x in 2014 and 2.3x in 2015. With estimated FCF of $1.1Bn in 4Q14 and $3.3Bn in 2015, Valeant could easily use the $1.56Bn remaining in its repurchase program to retire more debt or buy back stock."

For an analyst ratings summary and ratings history on Valeant Pharmaceuticals click here. For more ratings news on Valeant Pharmaceuticals click here.

Shares of Valeant Pharmaceuticals closed at $140.00 yesterday.

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