Perrigo's CEO Departure Leaves More Questions Than Answers; BTIG Downgrades Stock

BTIG’s Timothy Chiang mentioned that the unexpected departure of CEO Joe Papa created significant uncertainty for Perrigo Company plc Ordinary Shares PRGO

Chiang downgraded the rating on the company from Buy to Neutral.

CEO Resigns

The analyst stated that Mr. Papa’s resignation was likely to send a negative “ripple effect” through the company.

“While we do think John Hendrickson being named CEO fills part of the void, there remains numerous questions that the new CEO will now have to answer on its upcoming May 12 first quarter earnings call.” Chiang said.

In addition, Perrigo Company lowered its CY16 EPS guidance from $9.50-$9.80 to $8.20-$8.60, attributing the reduction to lower pricing expectations for its prescription pharma business, driven by competitive pressures, and weaker than anticipated results for the branded consumer health business.

Challenges

According to the BRIG report, “The Co. also highlighted that additional asset impairment charges associated with its branded consumer healthcare segment may be necessary with a decision expected by May 12.”

Perrigo Company has taken a $185 million impairment charge during the previous quarter due to a “weak cough/cold season,” as well as lower than anticipated sales across key countries.

“Based on the Co.’s reduced financial targets for CY16, a turnaround for the branded consumer segment is unlikely to occur any time soon,” Chiang added.

Estimates Reduced

The EPS estimates for CY16 and CY17 have been lowered. The revenue estimates for CY16 and CY17 have also been lowered to reflect lower sales growth across key segments.