UPDATE: Morgan Stanley Upgraded McKesson and Introduced PT

In a report published Friday, Morgan Stanley analyst Ricky Goldwasser upgraded

from Equal-weight to Overweight and introduced a PT of $177. Goldwasser reported that McKesson is likely to achieve, and possibly exceed, synergy targets. The analyst commented, “Supply chain synergies, financial accretion, and trends in core business provide MCK with visibility and should translate to ~50% in earnings growth thru 2015. While shares have outperformed YTD, we still see ~18% upside and a favorable risk-reward.” Yesterday, McKesson announced that they are acquiring Celesio, a leading international wholesale and retail company providing logistics and services to the pharmaceutical and healthcare sectors, for $8.3B. Celesio reported $29B in revenues and approximately $620M in EBIT, with operations in 20 countries. Management's guided sourcing synergies ranges between $275-$325, or 3-4% of the combined generic spread through 2018. The deal is expected to close by the end of March 2014 quarter. Morgan Stanley increased FY14 EPS from $8.33 to $8.69, FY15 EPS from $9.43 to $11.03, and FY16 EPS from $10.38 to $12.26. The analyst also adjusted CY14 estimates from $9.15 to $10.40 and CY15 from $10.08 to $11.84. The PT introduction assumes a 15x multiple. Note that distributors historically trade at 11x to 15x forward earnings. Reuters reported that Mckesson is rumored to receive a $5.5B bridge loan for the Celesio deal. Mckesson closed at $150 on Thursday and is currently trading +2.48%.