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Perrigo Maintained at Neutral

Zacks Equity Research

We continue to have a Neutral recommendation on Perrigo Company plc (PRGO). Dublin, Ireland-based Perrigo Company plc was formed following the Dec 2013 merger of Allegan, MI-based Perrigo Company and Elan Corporation. The merged entity, with a diversified revenue stream, is a global healthcare company with an attractive growth profile.

Why the Reiteration?

On Oct 31, Perrigo reported higher-than-expected earnings and revenues in the first quarter of fiscal 2014 (ended Sep 28, 2013). Net sales in the quarter climbed 21.3% to $933.4 million. Revenues increased $64 million due to the inclusion of results of Sergeant's Pet Care Products, Inc. (assets acquired by Perrigo in Oct 2012), Rosemont Pharma (acquired by Perrigo in Feb 2013), Velcera (acquired in Apr 2013) and Fera’s ophthalmic product portfolio (acquired in Jun 2013). Newly launched products boosted revenues by $54 million.

This was the fifth straight earnings surprise delivered by the company. The acquisition of Elan, completed in Dec 2013 for approximately $8.6 billion, has boosted Perrigo’s revenue stream further as it is now eligible to receive significant royalties on multiple sclerosis drug Tysabri from Biogen Idec (BIIB).

Moreover, Perrigo has reduced its tax liability by shifting its base to Ireland from the U.S. Through the deal, Perrigo expects to generate post-tax annual operating expense and tax savings in excess of $150 million. The acquisition has also expanded its geographic reach. The deal is expected to boost Perrigo’s adjusted earnings per share in fiscal 2014.

We expect investor focus to remain on the performance of the merged entity and hence retain our Neutral view on the stock. Our investment thesis is supported by a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked stocks include Jazz Pharmaceuticals (JAZZ) and Forest Laboratories Inc. (FRX). Both the stocks carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on PRGO
Read the Full Research Report on FRX
Read the Full Research Report on BIIB
Read the Full Research Report on JAZZ

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