Goldman Sachs Comments On Valeant Pharmaceuticals Guidance

Shares of Valeant Pharmaceuticals VRX ended the day up 19% following its 2011 guidance introduction that brought much in the way of improved visibility around the story. Both revenue and EPS guidance ranges were above Street estimates while synergy and tax forecasts were raised, which should drive Street estimates higher. After today's update and detailed review of Goldman Sachs model, it has made a number of P&L adjustments resulting in an 8% increase to its 2011-2013 adjusted cash EPS. Goldman raises its 12-month price target to $34 from $30 to account for the increased EPS but maintain a Neutral rating, given current valuation as a result of the recent run in the stock. Goldman's 12-month price target, still based 50% each on EV/EBITDA and P/E, increases to $34 from $30 on higher estimates and a one-quarter roll forward. Shares currently trade at 10.8X our 2012E EBITDA and 11.9X 2012E cash EPS, reflecting both Valeant's leveraged capital structure and low tax rate. VRX closed Thursday at $35.55