Perrigo Earnings Preview

Perrigo PRGO is scheduled to report fourth-quarter fiscal 2012 results Tuesday morning, August 16. Jim Cramer called this health care products maker the “best knock-off company known to man” and said he expects it report a good quarter. The consensus forecast has Perrigo posting quarterly earnings of $0.99 per share on revenues of $706.0 million. That is an increase from $0.71 per share and $619.4 million in the same period of last year. That EPS estimate has not changed in the past 90 days. Full-year earnings are anticipated to have risen 28.9% from a year ago to $3.98 per share, while revenues are expected to come in at $2.8 billion, an annual increase of 21.7%. The full-year EPS estimate has not changed in the past 60 days. The Company Perrigo has a market cap of $8.1 billion and operates in four segments. The Consumer Healthcare segment offers over-the-counter pharmaceutical products. The Nutritionals segment provides infant formula and dietary supplement products. The Rx Pharmaceuticals segment manufactures and markets a portfolio of generic prescription drug products. And the API segment manufactures and markets active pharmaceutical ingredients used by the generic drug industry and branded pharmaceutical companies. The company was founded in 1887 and is headquartered in Allegan, Michigan. During the three months that ended in June, Perrigo announced FDA approval of a generic equivalent to Zantac, received FDA approval to market a coated cinnamon nicotine gum, and launched a generic nasal spray. More recently, it completed the acquisition of privately held Paddock Labs. Looking Ahead Analysts so far expect to see sequential and year-over-year growth of both earnings and revenue in the current quarter. Note that analysts have underestimated per-share earnings in the past nine quarters. Performance Perrigo has a dividend yield of 0.3%, a return on equity of 24.6% and a long-term EPS growth forecast of 14.0%. But its P/E and PEG ratios are higher than the industry average. Yet six out of 13 analysts rate the stock at Buy or Strong Buy. Shares have bounced back from the recent sell-off to open today at $89.24. The share price is more than 39% higher than at the beginning of the year. The stock has outperformed competitors Johnson & Johnson JNJ, Mylan MYL and Prestige Brands PBH, as well as the broader markets, year to date. Action Items: Bullish: Traders interested in exchange traded funds invested in Perrigo might want to consider the following trades:

• First Trust Health Care AlphaDEX FXH: up almost 18% in the past year
• iShares Dow Jones US Pharmaceuticals IHE: up almost 17% in the past year
• iShares Nasdaq Biotechnology IBB: up almost 12% in the past year

Bearish: Traders looking for a contrarian play may want to consider these alternate positions:

• ProShares UltraShort Health Care RXD: up more than 24% in the past month
• Direxion Daily Healthcare Bear SICK: up more than 38% in the past month

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