Specialty-drug giant Allergan ( AGN ) got conflicting messages from Wall Street on Friday, as Goldman Sachs put the stock on its Conviction Buy list, while Mizuho lowered its price target, due to differing opinions about the company’s near-term strategy. Goldman analyst Jami Rubin wrote in a research note that after meeting with top executives, she believes the company is on track to deliver sustainable double-digit top-line growth and margin expansion. Rubin added that near-term catalysts include the closing of Allergan’s $40 billion sale of its generics business to Teva Pharmaceutical Industries ( TEVA ), which both Teva and Allergan confirmed this week will happen next month, as well as the potential $10 billion share buyback Allergan unveiled during its Q1 earnings report on Tuesday. For Rubin, Allergan’s decision to scale back its acquisition strategy in favor of the stock buyback makes sense. “We believe Allergan management is listening to shareholders and placing capital deployment priorities on unlocking value by investing in the most attractive assets available — Allergan shares,” Rubin wrote. Mizuho analyst Irina Koffler, however, found the shift less than inspiring. “Aside from a large $5-billion-to-$10-billion share buyback, management is not pursuing any transformational changes to the business (as expected), and (we) are less excited by an execution story,” she wrote in a research note, lowering her price target to 232 from 250, while affirming a neutral rating. The market seemed to be siding with Goldman. Allergan stock was up nearly 3% in morning trading on the stock market today , near 222. But Allergan shares are still down nearly 30% this year, and they plunged 15% on April 5 after the company and Pfizer ( PFE ) called off their $160 billion marriage as the Treasury Department issued new rules to discourage mergers that would enable U.S. companies to move their headquarters to lower-tax countries, such as Allergan’s home base of Ireland.
Specialty-drug giant Allergan ( AGN ) reported a mixed first quarter, affirmed guidance and announced a massive share buyback Tuesday, lifting its battered stock. Allergan stock was already boosted 6% Monday after Teva Pharmaceutical Industries ( TEVA ) said in its Q1 report that its buyout of Allergan’s generics unit, Actavis, is on track to close next month after having been delayed by various regulatory issues. This would render moot the worries over generic-drug pricing that drove the stock to a two-year low on Friday, after it had already been hammered by the break-up of its merger with Pfizer ( PFE ). The stock was up another 5.5% in early trading on the stock market today as Allergan reported operating earnings of $3.04 a share, up 15% from the year-earlier quarter and beating analysts’ consensus by 4 cents, according to Thomson Reuters. Sales climbed 48% to $3.8 billion, about $150 million below Wall Street’s average estimate. Allergan affirmed full-year revenue guidance of $17 billion vs. $15.1 billion last year. All the above numbers exclude Actavis. The company said it will use part of the roughly $40 billion in proceeds from the Teva deal to buy back stock. It plans to buy $4 billion to $5 billion over the next four to six months, and said if conditions allow it will consider extending the program up to as much as $10 billion. Allergan stock, once a resident of the IBD 50, still holds an excellent EPS Rank of 97 and actually declined less than the group as a whole during the drug-stock sell-off between August and February. But the high-profile dissolution of the Pfizer deal in early April pushed the stock down to single-digit Relative Strength Ratings, leading to a mediocre Composite Rating of 40.
Generic and specialty drug giant Teva Pharmaceutical Industries ( TEVA ) beat analysts’ Q1 earnings estimates and guided Q2 in line with expectations Monday, sending the stock up in early trading. Teva’s Q1 earnings excluding one-time items came to $1.20 a share, down 12% from the year-earlier quarter but 3 cents above analysts’ consensus. Revenue shrank 3.5% to $4.81 billion, but that’s more than $30 million past consensus. Teva guided Q2 earnings at $1.16 to $1.20 a share, down from $1.43 a year ago and bracketing consensus. It forecast Q2 revenue to decline slightly to $4.7 billion to $4.9 billion, on the low side of analysts’ $4.89 billion. Teva stock was up 4.5% in early trading on the stock market today , near 52.50, perhaps as a relief rally after the whole industry got spooked Friday by Endo International ‘s ( ENDP ) comments about pricing pressure in generic drugs , driving it to slash its full-year guidance. Teva stock fell to a more than 18-month low of 50 on Friday. Teva declined to offer 2016 guidance until it closes its buyout of Allergan ‘s ( AGN ) generics unit Actavis, which is expected to happen next month, but its Q2 guide did not suggest a dramatic underperformance. Credit Suisse analyst Vamil Divan did note, however, that the generics business, which makes up about 45% of total revenue, missed Wall Street’s estimate, though this was balanced out by a beat on the specialty side. “U.S. Generics revenues declined 32% year over year, mainly from a decline in sales of Nexium and Pulmicort,” Divan wrote in a research note. “Specialty Medicine revenues increased by 10% year over year, driven primarily by higher sales of CNS (central nervous system) and respiratory products.” Allergan stock, which also sold off Friday, was up 4.5% in early trading Monday. Endo stock was down 2.5%.