EUR 850.00 For Business Accounts Only

Morningstar | Perrigo 1Q: Keeping It Simple Is Challenging With Significant Moving Parts

At Perrigo’s analyst day, the company presented first-quarter results that were generally in line with expectations. Management also spent significant time reviewing the anticipated prioritization of self-care, but the discussion included significant moving parts, such as the announcement of the divestiture of the animal health segment, planned sale or spin-off of the prescription pharmaceutical segment, and the acquisition of Ranir, which made overall quarterly comparisons challenging. We maintain our no-moat rating and $48 fair value estimate.

This three-year turnaround plan to focus on consumer self-care was operationalized in the quarter, and management expressed conviction that the planned transformation will fuel sustainable growth, improve overall profitability, and offset continued pricing headwinds. The next steps will be to reconfigure the overall portfolio targeting the outlined key growth areas, rationalize existing markets, enter new channels, and invest in key growth areas and adjacencies.

Shares closed up 7% in response to the proposed strategy. Although we are encouraged by the discussed strategy, we would exercise caution on this name in light of the significant number of moving parts and execution risk.