Perrigo Co. has built competitive advantages and diversified its revenue sources to help sustain future growth, according to a Barrington Research analyst who upgraded the stock and issued a glowing review of prospects for the company, which makes store-brand over-the-counter drugs and infant formulas.
The Allegan, Mich., company will report fiscal first quarter results on Wednesday. Analysts expect, on average, earnings of $1.23 per share on $826.2 million revenue, according to FactSet.
Barrington Research analyst Charley Jones expects adjusted earnings to grow to $1.24 per share from $1.10 in last year's quarter. Jones also expects revenue to grow 14 percent to $830 million.
Jones said in a research note that his firm started covering Perrigo last year, and it has taken some time to fully appreciate the growth opportunities the company is exploiting. He said company management has left him "incredibly impressed," and Perrigo has "sustainable competitive advantages."
He upgraded his rating on Perrigo shares to "Outperform" from "Market Perform."
"Over the past year, we have gained a much greater appreciation for the sustainability of the transition from prescription to (over-the-counter) and branded to generic drugs and in our opinion, these trends are here to stay due to the realities of our economy and the ever increasing cost of health care," Jones wrote.
He also noted that the company diversified its growth strategy with its recent acquisition of the privately held animal healthcare company Sergeant's Pet Car Products Inc. for $285 million.
Perrigo shares hit a 52-week high of $120.78 on Oct. 5. They hit a low for the past year of $87.91 on Nov. 7, 2011.