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7 Takeaways From Perrigo's Preliminary Q4 Results

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7 Takeaways From Perrigo's Preliminary Q4 Results

Following the release of preliminary results for 2016 by Perrigo Company plc Ordinary Shares (NYSE: PRGO), Deutsche Bank offered seven key takeaways from the earnings call.

7 Takeaways

The seven takeaways outlined by analysts Gregg Gilbert and Greg Fraser were as follows:

    1. Management confidence in the company's ability to grow its core Consumer Healthcare Americas business organically at 2–4 percent, including 2–4 percent pricing headwinds, over the longer term.
    2. Since resetting expectations for the U.S. generics business in the second half of 2016, the company hasn't seen a deterioration in it.
    3. The company's estimate of 9–11 percent pricing erosion for its base generics business, excluding Entocort.
    4. The company continues to work to address FDA's questions on its ProAir application, although it has not assumed contribution in 2017.
    5. The company's plans to optimize its cost structure, with over $130 million in savings expected for 2018.
    6. The strategic review of its generics business is ongoing.
    7. The company expects to file its 10-K by the extension deadline of March 16, 2017.

Related Link: Perrigo's Weak Near-Term Outlook Is Concerning

Review Of Preliminary FY 2016 Results

Deutsche Bank noted that Perrigo reported 2016 revenues of $5.5 billion and expects adjusted earnings per share of $7.10–$7.25, both metrics ahead of its estimates.

The company did not provide detailed financials, pending finalization of its 10-K due to a delay in finalizing impairments. The company expects cash flow from operations of $1.01 billion, above its previous estimate of $900 million and Deutsche Bank's estimate of $950 million.

The firm also noted the company's plans to divest the Tysabri royalty stream to Royalty Pharma for $2.2 billion upfront and up to $650 million in sales-based milestones. Commenting on the terms, Deutsche Bank said the sales price was somewhat below what it was expecting.

Lowering Estimates

Deutsche Bank lowered its 2017 revenue estimate to $5.2 billion from $5.3 billion and 2018 estimate to $5.3 billion from $5.4 billion, premised on lower sales for Consumer Healthcare Americas and Consumer Healthcare International, partially offset by higher sales for its generics business. The 2017 earnings per share estimate stands reduced to $6.50 from $6.89 and 2018 estimate to $7.13 from $7.20.

Execution Critical

Concluding, Deutsche Bank said it continues to view Perrigo as a unique asset with good value creation potential over the longer term. According to the firm, the recently refreshed board is a constructive step. The firm thinks execution against the company's own goals in the coming quarters will be critical.

Deutsche Bank maintains its Buy rating on the shares of Perrigo, while it trimmed its price target to $93 from $95.

At the time of writing, shares of Perrigo were down 11.22 percent at $75.18 on roughly four times average volume.

Latest Ratings for PRGO

DateFirmActionFromTo
Oct 2019UpgradesHoldBuy
Sep 2019MaintainsMarket Perform
Sep 2019MaintainsHold

View More Analyst Ratings for PRGO
View the Latest Analyst Ratings

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