02 March 2021

Perrigo Shares Spike Despite Earnings Miss

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What’s happening: Shares of Perrigo gained on Monday, despite the company reporting fourth-quarter earnings below expectations.

What happened: Lower sales of cough and cold products resulted in Perrigo recording a net loss for the fourth quarter.

However, the company’s decision to sell one of its underperforming business sent its shares higher on Monday.

How were the results: The Dublin, Ireland-based company swung to a loss in the fourth quarter, with a decline in revenues.

  • Revenue shrank 2.5% to $1.3 billion, failing to meet the consensus view of $1.32 billion.
  • Net loss came in at $162.6 million, versus a profit of $146.1 million in the same quarter in the previous year.
  • Adjusted earnings were 93 cents per share, missing market expectations of $1 per share.

Why it matters: Although elevated covid-19 infections drove people to focus on their health, the lockdowns and restrictions resulted in Perrigo’s disappointing quarterly results, with a decline in cold and flu medicine sales.

Net sales of the company’s Prescription Pharmaceuticals segment declined 7.7% to $236 million, while the Consumer Self Care Americas segment recorded a decline of 1.4% year-over-year to $701 million and the Consumer Self Care International segment’s sales contracted by 1.1%.

Perrigo decided to focus on its core busines and announced plans to sell its generic pharmaceuticals unit to Altaris Capital Partners for $1.55 billion, which includes a $1.5 billion cash payment. As part of the deal, Altaris will assume more than $50 million in potential R&D milestone payments and contingent purchase obligations with third-party partners. The transaction will result in Perrigo becoming a pure-play global consumer self-care firm.

Management expects the sale to close by the end of the third quarter. "After the transaction closes, Perrigo expects to have more than $2 billion in cash available to advance its consumer self-care strategy, preferably through prudent and revenue accretive M&A," CEO Murray Kessler said in a statement.

Perrigo guided to organic sales growth of 3% and earnings between $2.50 and $2.70 per share for 2021.

How shares responded: Perrigo’s shares climbed 4.7% to close at $42.26 on Monday after trading as high as $45.32 during the session. The stock has lost around 13% in the last three months.

What to watch: Markets will keep an eye on the regulatory approvals for the sale of the company’s underperforming business and on how Perrigo uses the proceeds to strengthen its core business.

The Markets Today

     

European stocks will be in focus today, ahead of the consumer price inflation report.

Context: European stocks recorded gains on Monday following a decline in US Treasury yields and encouraging news related to the rollout of covid-19 vaccines.

Details: The sharp rise in European markets followed the continued easing of US Treasury yields from the elevated levels reached last week. The global equity market was under pressure last week due to the continuous rise in bond yields, which made stocks look less appealing to investors.

Markets also cheered positive news on the covid-19 vaccine front with the US CDC (Centers for Disease Control and Prevention) advisory panel voting to recommend Johnson & Johnson’s single-shot vaccine. The company said it aims to deliver 4 million doses this week.

Strong economic data released on Monday also lifted market sentiment, with the final reading of the IHS Markit Eurozone manufacturing PMI improving to 57.9 in February, versus a preliminary estimate of 57.

European stocks may also find support today from the upturn in US stocks on Monday, with the House clearing the new $1.9 trillion covid-19 rescue bill over the weekend.

The pan-European Stoxx 600 closed higher by 1.84% on Monday, with travel-related stocks adding more than 3% and all major sectors trading in positive territory.

London’s FTSE 100 gained 1.62%, while the German DAX 30 and French 40 added 1.64% and 1.57%, respectively.

What to watch: Investors await inflation data from the Eurozone. The core inflation rate for the Eurozone is expected to decline to 1.1% year-on-year in February, from a previous reading of 1.4%.

Rising covid-19 cases remain a top concern for markets, with total global infections exceeding 114.4 million.

Other Markets: US indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.95%, 2.38% and 2.89%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s retail sales, unemployment rate and unemployment Change, UK’s house price growth, Spain’s unemployment change and foreign tourist arrivals, India's balance of trade, Canada’s GDP growth rate, Mexico’s foreign exchange reserves as well as the US Redbook index, ISM New York index and IBD/TIPP economic optimism index.

 

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