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The Zacks Analyst Blog Highlights: Kohl's, Actavis, Amgen, Mylan and Pernix Therapeutic Holdings

Zacks Equity Research

For Immediate Release

Chicago, IL – February 1, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Kohl’s Corporation (KSS), Actavis, Inc. (ACT), Amgen (AMGN), Mylan (MYL) and Pernix Therapeutic Holdings, Inc. (PTX).

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Here are highlights from Thursday’s Analyst Blog:

Kohl’s Downgraded to Underperform

On Jan 28, we downgraded specialty departmental store Kohl’s Corporation (KSS) to Underperform due to weaker-than-expected holiday season sales, which also forced the company to reduce its earnings expectation for the fourth quarter and fiscal year 2012.

Why the Downgrade?

Kohl’s performance during the holiday season was impacted by unfavorable weather conditions and lower consumer confidence, which forced Kohl’s to give more than expected discounts to its customers. This was reflected in Dec comparable store sales, which were lower than the company’s expectations. Notably, the company’s Nov sales were also below expectations.

The sluggish sales also prompted the company to slash its expectations for the fourth quarter and fiscal year 2012. The company has reduced its earnings expectation to a range of $1.60 to $1.62 for the fourth quarter and $4.11 to $4.13 for fiscal 2012 versus its previous guidance of $2.00 to $2.08 for the fourth quarter and $4.52 to $4.60 for fiscal 2012.

Estimates for Kohl’s have been declining ever since it reported its Dec comparable sales. The Zacks Consensus Estimate for fiscal 2012 has gone down 7.0% to $4.13 per share over the last 30 days, while the Zacks Consensus Estimate for fiscal 2013 declined 6.1% to $4.58 per share over the same timeframe. With the Zacks Consensus Estimates for both fiscal 2012 and 2013 going down, the company now has a Zacks Rank #5 (Strong Sell).

Actavis Provides 2013 Guidance

Actavis, Inc. (ACT), formerly known as Watson Pharmaceuticals, Inc., recently provided an update on its 2012 performance, 2013 outlook and prospects.

The company said that it expects 2012 earnings on the higher end of its previously issued guidance range of $5.85 to $5.95, up 25% from 2011. 2012 revenues are expected to increase 29% to about $5.9 billion. We note that the Zacks Consensus Estimate of $5.94 per share is already on the higher end of the guidance range.

Actavis expects to earn $7.70 - $8.10 per share on total revenues of about $8.1 billion in 2013. During 2013, the company expects low single-digit pricing erosion in the US and mid single-digit percentage price erosion in ex-US markets. Actavis said that it still expects cost synergy savings of $100 million in 2013 mainly from SG&A, R&D and raw material costs.

Actavis Pharma, the company’s global generics business, is expected to post revenues of $6.3 billion - $6.5 billion in 2013. Actavis is the third largest player in the global generics market and has a presence across 62 countries. The company intends to launch its generic version of Pulmicort Respules in the second quarter of 2013. While the company expects an additional competitor for generic Concerta to enter the market in 2013, it does not except any competition for its generic versions of Lidoderm and Adderall XR until 2014.

Actavis' global brands business, Actavis Specialty Brands, is slated to post revenues of $550 million - $600 million in 2013. Products like Rapaflo, Generess FE, the Crinone franchise and the recently completed Uteron acquisition should help drive revenues. The company is also working on the development of biosimilars in collaboration with Amgen (AMGN).

The Anda Distribution segment is expected to post revenues of $1.0 billion - $1.2 billion.

Our Take

While revenue guidance was in line with expectations, earnings guidance was below expectations with the Zacks Consensus Estimate standing at $8.20 per share. One of the factors behind this is the entry of an additional competitor for generic Concerta. We believe the company should be able to achieve its guidance easily. With fewer major patent expiries slated to occur in the next few years, we are encouraged by Actavis’ focus on building its branded and biosimilars pipeline.

Actavis currently carries a Zacks Rank #3 (Hold). Other generic players like Mylan (MYL) and Pernix Therapeutic Holdings, Inc. (PTX) currently look better positioned. These companies carry a Zacks Rank #2 (Buy).

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