New to Zacks? Get started here.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.
If you wish to go to ZacksTrade, click
OK. If you do not, click Cancel.
Back to top
Back to Neutral on Endo Health
We are reverting to a Neutral recommendation on
Endo Health Solutions ( ENDP - Analyst Report) from Underperform as we believe that the stock is fairly valued at current levels. Our target price is $32.00. The stock carries a Zacks Rank #3 (Hold) in the short run. Why the Upgrade?
In Feb 2013, Endo Health reported higher- than- expected earnings in the final quarter of 2012 on the back of reduced costs. Endo Health’s fourth quarter 2012 adjusted earnings of $1.62 per share beat the Zacks Consensus Estimate of $1.56.
However, the company reported lower- than- expected revenues in the final quarter of 2012, hurt by reduced sales of painkiller Opana ER. Revenues came in at $801 million, flat year over year, but well short of the Zacks Consensus Estimate of $808 million.
Endo Health maintained the guidance for 2013, issued by it in Jan 2013. The US-based diversified healthcare company continues to expect adjusted earnings per share for 2013 in the range of $4.40–$4.70 per share. Our 2013 earnings estimate is well within the guidance range provided by the company. Endo Health continues to expect to end 2013 with revenues in the range of $2.80–$2.95 billion. We expect the entry of a generic competitor,
Actavis, Inc. , for Endo Health’s lead drug Lidoderm in Sep, to hurt the latter’s 2013 sales.
Moreover, Opana ER is already facing generic competition. Moreover, generic threat looms over many other key drugs at Endo Health. Patent disputes and entry of generics could weaken the company’s portfolio substantially.
We believe all the negative news is already reflected in the stock price, and hence upgrade the stock to Neutral from Underperform. Other Stocks to Consider
Favorably placed stocks in the pharma sector include Avanir Pharmaceuticals, Inc. and Shire plc ( SHPG - Analyst Report) . Both companies carry a Zacks Rank #2 (Buy) and are worth considering.