Morgan Stanley Cuts Perrigo's Price Target To $112, Expects Lower Long-Term Growth

While naming its new CEO, Perrigo Company plc Ordinary Shares PRGO also lowered its 2016 guidance, within nine weeks of having issued it.

Morgan Stanley’s David Risinger maintained an Equal-Weight rating on the company, while lowering the price target from $151 to $112, to reflect expectations of slower growth.

Estimates Lowered

Pointing out Perrigo Company’s financials continued to be 2H weighted and dependent on new launches, Risinger lowered the 2016 EPS estimate from $9.65 to $8.25, 2 percent below the midpoint of the revised guidance.

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The 2017 EPS estimate was also reduced from $10.84 to $9.24. The long-term growth expectations were also lowered.

“Although we believe Perrigo's Consumer businesses should trade at a more substantial premium, they only represent about half of earnings; the other half of the portfolio (generic Rx and Tysabri) should trade at a discount, in our view,” Risinger stated.

Slower Long-Term Growth

The analyst believes that the new CEO, John Hendrickson, should consider lowering the company’s previous organic revenue growth target of 5–10 percent to about 5 percent, given that “Mgmt discussed a tougher pricing environment for generics and "weaker-than-expected" performance in BCH.”

The four-year revenue CAGR (2016–2020) estimate has been lowered from 5 percent to 4 percent.