Analyst: Despite Industry Woes, Investigations, And Management Shake-Up, Perrigo Is A Buy

Perrigo Company plc Ordinary Shares PRGO's business has faced multiple pressures, including industry-wide price erosion, a legal battle for possible collusion in generic drug pricing along with a management transition. At the same time, some analysts see the bullish case for owning the stock moving forward.

The Analyst

Argus' Jasper Hellweg upgraded Perrigo's stock from Hold to Buy with a new $93 price target.

The Thesis

Perrigo's status as being a leader in the OTC generic drugs industry remains unchanged and a new management team continues to restructure its operations and shown initial signs of success, Hellweg said in a note. Some of the initiatives the company took include a focus on organic growth, openness to exiting unprofitable units and a focus on paying down debt. The company expects its initiatives to generate more than $130 million in annual savings by the middle of next year, the analyst said.

Perhaps more important, Perrigo's pipeline includes around 20 product candidates that are awaiting approval by the U.S. Food and Drug Administration, the analyst said. As such, the stock is "favorably valued" in the low $80 range which implies a multiple of 17 times on estimated 2017 EPS, which is below its five-year historical average range of 10.1-26.0 and below the peer group average of 18.7 times.

Price Action

Shares of Perrigo gained more than 1 percent ahead of Friday's market open.

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