Still Bullish on Celgene
by Zacks Equity ResearchFebruary 16, 2012 | Comments : 0 Recommended this article: (0)
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We are maintaining our Outperform recommendation on Celgene Corporation ( CELG - Analyst Report ) despite its narrow miss in the final quarter of 2011 since the long-term prospects of the company are bright.
Celgene reported fourth-quarter and 2011 results in January 2012. The biotechnology company earned 93 cents per share on an adjusted basis. Earnings were below the Zacks Consensus Estimate by 2 cents. Higher-than-expected expenses were primarily responsible for the earnings miss in the quarter. The company also narrowly missed revenue estimates.
We are, however, bullish on the long-term prospects of the company. Management also gave a bright outlook for 2012 with adjusted earnings expected to improve by 25%. We expect Celgene to easily achieve the 2012 guidance driven by its oncology products Revlimid, Abraxane, Vidaza and Istodax.
We are impressed by Celgene’s financial flexibility and strong balance sheet. The company remains in excellent financial health, with $2.65 billion in cash on hand at the end of 2011 and a debt-to-capitalization ratio of around 24%. In August 2011, the board of directors cleared a program to buy back up to an additional $2 billion of its common stock – this should help boost the bottom line.
Celgene bought back 10.2 million shares during the fourth quarter of 2011. The company bought back 10.2 million shares during the fourth quarter of 2011. During 2011, Celgene repurchased approximately 38.3 million shares for $2.22 billion. We believe that the buyback program highlights the company’s commitment to create value for shareholders.
Moreover, Celgene’s efforts to develop its pipeline also pleases us. Key pipeline related news is expected in 2012. Positive news regarding the pipeline would boost the stock further.
Our optimism is also justified by the Zacks #2 Rank (Buy rating) carried by the stock in the short run.
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