Argus Upgrades Perrigo, Stock Is At A Favorable Entry Point

• Shares of Perrigo Company plc PRGO have been trending south in the last three months and are down 16 percent since September 10.
• Argus’ John Eade upgraded the rating on the company from Hold to Buy, while establishing a price target of $170.
• The company’s strong fundamentals may drive upside in the near future, Eade mentioned.

Analyst John Eade said that the recent pullback in Perrigo’s shares, following the collapse of the deal with Mylan NV MYL in November, offers a favorable entry point. The company’s shares have significantly underperformed the market over the last three months, declining 15 percent, versus a 5 percent gain in the S&P 500.

Eade believes that although Perrigo is unlikely to receive another bid in the near term, the company’s strong fundamentals should push shares higher.

The company’s strengths lie in its focus on generic over the counter pharmaceutical products, entry into new international markets, branching out into adjacent product categories and reducing costs with the help of bolt-on-acquisitions.

Eade noted that Perrigo’s operational efficiency is driving margin gains. “This should provide a buffer when patent expirations on brand-name drugs begin to slow,” he added.

The EPS estimates for 2015 and 2016 have been raised from $7.75 to $7.78 and from $8.75 to $9.45, respectively, to reflect strong growth in Rx Pharmaceuticals and Specialty Sciences and operating efficiencies in Consumer Healthcare.