NEW YORK (AP) -- Watson Pharmaceuticals shares rose Thursday as Wells Fargo upgraded its rating, citing the company's acquisition of a former competitor.
THE SPARK: Analyst Michael Tong raised his rating to "Outperform" from "Market Perform." The company's stock price has declined in the last month, but Tong said he now believes Watson will report a bigger profit in 2013 on greater sales of generic drugs, lower depreciation costs, and reduced debt. The analyst said the Parsippany, N.J., company could earn $7.68 per share, up from his previous estimate of $7.17 per share.
Tong said he thinks the stock could be worth $84 to $90 per share compared to his earlier estimate of $75 to $79 per share.
THE BIG PICTURE: Watson agreed to buy its rival, Actavis, on April 25 for $5.6 billion. Actavis is based in Switzerland, and Watson said the deal will expand its business in Russia and Central and Eastern Europe. It will also make Watson the third-largest generic drug company in the world in terms of revenue: the deal is expected to close during the fourth quarter, but Watson said the companies should have combined annual sales of about $8 billion in 2012.
SHARE ACTION: Shares of Watson Pharmaceuticals Inc. rose $2.12, or 3 percent, to $72.83 in afternoon trading. The stock reached an all-time high of $77.73 on April 30, days after the Actavis deal was announced, but it has declined 9 percent from that price.
