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Perrigo (PRGO) Hits 52-Week High: What’s Driving the Stock?


Shares of Perrigo Company plc PRGO hit a new 52-week high of $92.16 on Jan 11, just a few days after the company announced the appointment of its new chief executive officer (CEO), Uwe Rohrhoff. The stock eventually closed at $91.99.

Perrigo’s shares underperformed the industry in 2017. While the stock gained 17.7%, the broader industry rallied 23.7%. However, the company has recovered in 2018 and is already up 5.5%.

On Jan 8, the company ended its search for a new CEO by appointing Uwe Rohrhoff, effective Jan 15. The new CEO will succeed John T. Hendrickson, who had announced his retirement plan in June 2017. John T. Hendrickson will resign as CEO and a board member on Jan 15 but will continue to remain with the company until Mar 15 to ensure a smooth and successful transition.

Uwe Rohrhoff brings with him a strong record in operations and global leadership positions. He also has a proven track record of driving growth and profitability, besides managing a complex operating platform in global healthcare markets.

Currently, Perrigois facing a challenging pricing environment in the Rx segment due to industry and competitive pressures in the generics sector that is hurting the company’s top line. The U.S. Department of Justice Antitrust Division has also been conducting an investigation at Perrigo seeking information about its drug pricing practices.

Meanwhile, the Branded Consumer Healthcare (BCH) segment continues to be impacted by market dynamics due to softness in certain leading brand categories primarily owing to lower sell-through during 2016 as a result of re-staging the launch timing of certain products, changes in timing of certain advertising and promotional campaigns.

However, the company is making efforts to overcome these challenges. In March 2017, Perrigo divested its Tysabri royalty stream in order to monetize the asset. Further, in November, the company also divested its Active Pharmaceutical Ingredient (API) business to SK Capital for $110 million in order to focus on its core business.

In February 2017, the company adopted a cost optimization strategy to slash workforce approximately 14% from its global non-production staff. This workforce reduction is expected to generate annual savings worth $130 million by mid-2018.

Supported by these efforts, Perrigo raised its earnings outlook for 2017 on the third quarter 2017 earnings call as it sees continued positive execution across all the business segments.

It now remains to be seen, how the new CEO will continue to guide the company through the challenges it has been facing over the past couple of years.

Perrigo Company Price

Zacks Rank & Stocks to Consider

Perrigo has a Zacks Rank #3 (Hold). Better-ranked stocks from the health care space include Exelixis, Inc. EXEL, XOMA Corporation XOMA and Sucampo Pharmaceuticals SCMP. While Exelixis and XOMA sport a Zacks Rank #1 (Strong Buy), Sucampo carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Exelixis’ earnings per share estimates have moved up from 72 cents to 73 cents for 2018 in the last 60 days. The company delivered a positive earnings surprise in all the last four quarters, with an average beat of 572.92%. Share price of the company surged 59.8% in 2017.

XOMA’s loss per share estimates have narrowed from $1 to 42 cents for 2018 in the last 60 days. The company pulled off a positive earnings surprise in one of the last four quarters, with an average beat of 47.92%. Share price of the company skyrocketed 604.9% in 2017.

Sucampo’s earnings per share estimates have moved up from 3 cents to $1.12 for 2017 and from $1.15 to $1.19 for 2018 in the last 60 days. The company delivered a positive earnings surprise in three of the last four quarters, with an average beat of 15.63%. Share price of the company has surged 45.8% in 2017.

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