On Monday, Piper Sandler showed confidence in Perrigo Co . (NYSE:NYSE:PRGO) by raising its stock price target from $35.00 to $39.00, while reaffirming an Overweight rating on the stock. The firm's optimism is driven by the resilience of Perrigo's sales, particularly in Private Label products, compared to branded counterparts.
According to the latest data, Private Label unit sales saw a slight decline of 0.4% year-over-year in the four weeks ending March 24, but experienced a slight increase of 0.2% year-over-year for the first quarter to date. In terms of dollar sales, there was a 3.8% year-over-year growth in the recent four weeks and a 4.2% increase for the quarter to date.
The firm also noted positive sentiments from covered companies about the upcoming Spring allergy season, which could extend the favorable volume trends in the cold, flu, and allergy category into the second quarter.
Piper Sandler has made adjustments to its model following recent earnings commentary from Perrigo's management. Although the firm's earnings per share (EPS) estimates beyond 2024 have been reduced, there remains potential for upside. This potential is attributed to a quicker recovery in infant formula sales and the successful ramp-up of Opill, a product that recently gained coverage from CVS Caremark.
The new price target is based on a higher approximately 12 times 2025 estimated EPS multiple, a change from the previous 10 times multiple. This adjustment reflects the ongoing resilience observed in the Private Label product category.
InvestingPro Insights
As Piper Sandler enhances its outlook on Perrigo Co. (NYSE:PRGO), reinforcing a bullish stance with a revised price target, it's crucial to consider some key financial metrics and expert tips from InvestingPro.
The company's market capitalization stands at $4.26 billion, reflecting the scale of its operations. Despite a challenging period, with a negative P/E ratio over the last twelve months, analysts are optimistic about Perrigo's future, forecasting a return to profitability this year.
InvestingPro Tips also highlight Perrigo's commendable track record of dividend reliability, having raised its dividend for 21 consecutive years and maintained payments for 22 years. This consistency is a testament to the company's commitment to shareholder returns. Moreover, the valuation implies a strong free cash flow yield, suggesting that the stock may be undervalued relative to its cash-generating potential.
These insights, coupled with the company's modest revenue growth of 4.58% in the last twelve months and a solid gross profit margin of 36.09%, paint a picture of a company that, while facing short-term headwinds, has a resilient business model and potential for future growth. For investors looking to delve deeper into Perrigo's financial health and future prospects, more InvestingPro Tips are available at https://www.investing.com/pro/PRGO, with the opportunity to use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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