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Perrigo Needs 'Meet-Or-Beat' Quarters, Deutsche Bank Says In Downgrade

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Perrigo Needs 'Meet-Or-Beat' Quarters, Deutsche Bank Says In Downgrade
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Perrigo Company PLC, (NYSE: PRGO) was hit with a downgrade from Deutsche Bank after an eventful week that included the announced separation of its prescription pharmaceutical business and its second-quarter report. 

The Analyst

Deutsche Bank analyst Gregg Gilbert downgraded Perrigo from Buy to Hold and lowered the price target from $93 to $78.

The Thesis

In light of soft Q2 results and a lowered outlook, Deutsche Bank is moving to the sidelines for Perrigo's generics and consumer businesses, Gilbert said in the downgrade note. (See the analyst's track record here.) 

“The company’s strategic decision to separate the Rx business from the consumer business could be a good long-term decision, but it will at a minimum take some time for the market to fully assess and understand the financial and operational merits of this move and whether and how it can affect shareholder value," the analyst said. 

It's important for Perrigo to reestablish "meet-or-beat" quarterly performance, Gilbert said. 

In Q2, Perrigo reported an adjusted EPS of $1.22, a 4-percent decrease in revenue and a lowered prescription sales outlook. 

The Deutsche Bank analyst outlined other key takeaways from the print: 

  • Perrigo recognizes the advantage of separating the companies.
  • The pharma company is disappointed by the performance of its animal health business, but has not made any decisions on its future.
  • The launch of gProair and scopolamine are confirmed. 
  • “The weakness in generics was based in part on pricing dynamics that were somewhat more negative than the company had expected,” Gilbert said. 

Price Action

Perrigo shares were trading down 2.76 percent to $68.10 at the time of publication Friday. 

Related Links:

Goldman Sachs Swaps Perrigo, Johnson & Johnson Ratings

Analyst: Despite Industry Woes, Investigations, And Management Shake-Up, Perrigo Is A Buy

Latest Ratings for PRGO

DateFirmActionFromTo
Aug 2018Wells FargoMaintainsMarket PerformMarket Perform
Aug 2018RBC CapitalMaintainsSector PerformSector Perform
Aug 2018JP MorganMaintainsNeutralNeutral

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