HOLD ACTAVIS PLC ACT

Transcription

November 9, 2014
NYSE: ACT
ACTAVIS PLC
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
NA
B-
C+
C
Annual Dividend Yield
NA
SELL
C-
D+
D-
Beta
0.31
Sector: Health Care
ACT BUSINESS DESCRIPTION
Actavis plc, an integrated specialty pharmaceutical
company, is engaged in the development,
manufacture, marketing, sale, and distribution of
pharmaceutical products in the Americas, Europe,
the Middle East, Africa, Australia, and the Asia
Pacific.
D
E+
E
E-
F
HOLD
Market Capitalization
$66.4 Billion
Sub-Industry: Pharmaceuticals
Weekly Price: (US$)
SMA (50)
52-Week Range
$153.42-$254.41
RATING SINCE
10/02/2013
Price as of 11/6/2014
$250.38
Source: S&P
SMA (100)
1 Year
2 Years
250
225
200
175
150
STOCK PERFORMANCE (%)
3 Mo.
Price Change
21.24
1 Yr.
60.40
3 Yr (Ann)
56.98
125
100
GROWTH (%)
Last Qtr
82.96
-1,689.63
-906.12
Revenues
Net Income
EPS
12 Mo.
54.07
-82.22
8.72
RETURN ON EQUITY (%)
ACT
Q3 2014
-3.58
Q3 2013
-15.33
Q3 2012
4.44
3 Yr CAGR
43.53
NA
NA
Ind Avg
17.10
20.74
21.11
S&P 500
14.28
13.75
13.93
75
Rating History
BUY
BUY
HOLD
Volume in Millions
40
20
2012
2013
0
2014
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
RECOMMENDATION
We rate ACTAVIS PLC (ACT) a HOLD. The primary factors that have impacted our rating are mixed - some
indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a
positive or negative performance for this stock relative to most other stocks. The company's strengths can
be seen in multiple areas, such as its robust revenue growth, solid stock price performance and good cash
flow from operations. However, as a counter to these strengths, we also find weaknesses including
deteriorating net income, generally higher debt management risk and feeble growth in the company's
earnings per share.
P/E COMPARISON
n/m
29.64
19.70
ACT
Ind Avg
S&P 500
HIGHLIGHTS
ACT's very impressive revenue growth greatly exceeded the industry average of 8.8%. Since the same
quarter one year prior, revenues leaped by 83.0%. This growth in revenue does not appear to have trickled
down to the company's bottom line, displayed by a decline in earnings per share.
2012
2013
Q2 0.28
Q3 -3.95
Q1 0.55
Q4 -0.86
Q3 0.49
Q2 -4.27
Q1 -0.79
Q4 0.21
Q3 0.60
Q1 0.43
Q2 -0.49
EPS ANALYSIS¹ ($)
Compared to its closing price of one year ago, ACT's share price has jumped by 60.40%, exceeding the
performance of the broader market during that same time frame. Regarding the stock's future course, our
hold rating indicates that we do not recommend additional investment in this stock despite its gains in the
past year.
The gross profit margin for ACTAVIS PLC is rather high; currently it is at 64.29%. It has increased significantly
from the same period last year. Regardless of the strong results of the gross profit margin, the net profit
margin of -28.31% is in-line with the industry average.
2014
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
Despite currently having a low debt-to-equity ratio of 0.52, it is higher than that of the industry average,
inferring that management of debt levels may need to be evaluated further. Despite the fact that ACT's
debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.57 is low and demonstrates weak
liquidity.
The company, on the basis of change in net income from the same quarter one year ago, has significantly
underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income
has significantly decreased by 1689.6% when compared to the same quarter one year ago, falling from $65.60
million to -$1,042.80 million.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2014. All rights reserved.
Report Date: November 9, 2014
PAGE 1
November 9, 2014
NYSE: ACT
ACTAVIS PLC
Sector: Health Care Pharmaceuticals Source: S&P
NA
NA
PEER GROUP ANALYSIS
80%
VRX
V
FA
AB
OR
TEVA
SHPG
AGN
AZN
LE
AB
-20%
R
VO
FA
Revenue Growth (TTM)
LLY
50%
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $20.4 Billion and $121.7
Billion. Companies with NA or NM values do not
appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
80%
REVENUE GROWTH AND EARNINGS YIELD
VRX
AB
OR
LE
UN
PRGO
R
VO
FA
LE
AB
-2%
AZN
AGN
The industry depends on federal subsidies for cost reductions. The US government enacted the Medicare
Prescription Drug, Improvement, and Modernization Act (MMA) in 2003 to provide prescription drug benefits
to the elderly and disabled. Medicare Part D, a component of MMA, which came into effect in 2006, altered
the revenue model of pharma companies. Revenue from such programs is expected to reach $724 billion by
2015 as federal subsidies will lower co-payments and deductibles for specialty drugs.
Horizontal and vertical integration has created health maintenance organizations (HMOs) and pharmacy
benefit management firms (PBMs). In order to cut costs and remain competitive, the US pharma majors have
been outsourcing research to low-cost service providers in India and China.
The promising era of personalized medicine has begun. Dozens of exciting new drugs for the treatment of dire
diseases such as cancer, AIDS, Parkinson's, and Alzheimer's are either on the market or are very close to
regulatory approval. The industry has shifted its focus from blockbuster drugs (chemistry-based drugs) to
specialized products, geared towards specific disorders. According to government estimates, American drug
purchases may reach $497 billion by 2016, supported by a rapidly aging population, inflation, and the
introduction of expensive new drugs.
PEER GROUP: Pharmaceuticals
V
FA
ACT
-20%
$250.38
The industry faces unprecedented challenges from stringent environmental regulations and patent
expirations on billion-dollar products. Industry experts believe that generic competition will wipe out more
than $60 billion from US industry sales over the next five years as more than three dozen drugs lose patent
protection. Merck lost a $3 billion patent protection for its osteoporosis drug Fosamax in 2008 while Eli Lilly
lost an estimated 90% of Zyprexa sales. The FDA is rejecting more drugs on safety concerns and a lack of
compelling evidence of definite advancement from existing drugs.
EBITDA Margin (TTM)
Revenue Growth (TTM)
52-Week Range
$153.42-$254.41
LE
PRGO
UN
20%
$66.4 Billion
INDUSTRY ANALYSIS
US pharmaceutical companies are involved in the discovery, manufacturing, distribution, and research of
generic and branded drugs. The industry accounts for 27.3% of the healthcare sector and is capital-intensive
with exorbitant R&D costs. Most companies are mature and characterized by high margins and higher
dividend pay-outs. Major players include Pfizer (PFE), Bristol-Myers Squibb (BMY), Abbott Laboratories (ABT),
and Eli Lilly (LLY). The industry employs more than 400,000 in the US. The 50 largest companies control over
80% of the market.
REVENUE GROWTH AND EBITDA MARGIN*
ACT
Beta
0.31
SHPG
ABBV
TEVA
NVO
SNY
LLY
6%
Earnings Yield (TTM)
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -12.7% and
71.5%. Companies with NA or NM values do not
appear.
Ticker
ACT
ABBV
NVO
AZN
LLY
AGN
TEVA
VRX
SHPG
PRGO
SNY
Recent
Company Name
Price ($)
ACTAVIS PLC
250.38
ABBVIE INC
62.71
NOVO NORDISK A/S
43.79
ASTRAZENECA PLC
72.85
LILLY (ELI) & CO
66.96
ALLERGAN INC
197.40
TEVA PHARMACEUTICALS
58.72
VALEANT PHARMACEUTICALS IN 128.77
SHIRE PLC
199.95
PERRIGO CO PLC
152.49
SANOFI
45.86
Market
Cap ($M)
66,366
99,815
92,509
91,996
74,555
60,721
56,008
43,225
39,295
20,423
121,710
Price/
Earnings
NM
27.27
25.25
45.53
26.78
46.01
18.29
87.60
21.29
128.14
22.93
Net Sales
TTM ($M)
11,784.70
19,619.00
15,108.83
26,816.00
20,303.10
7,011.80
20,534.00
8,047.26
5,772.00
4,078.90
43,871.29
Net Income
TTM ($M)
-1,046.00
3,712.00
4,566.53
2,022.00
2,689.50
1,299.90
2,748.00
502.37
1,297.20
190.20
5,372.79
The peer group comparison is based on Major Pharmaceuticals companies of comparable size.
PAGE 2
November 9, 2014
NYSE: ACT
ACTAVIS PLC
NA
NA
COMPANY DESCRIPTION
Actavis plc, an integrated specialty pharmaceutical
company, is engaged in the development, manufacture,
marketing, sale, and distribution of pharmaceutical
products in the Americas, Europe, the Middle East,
Africa, Australia, and the Asia Pacific. It operates in
three segments: Actavis Pharma, Actavis Specialty
Brands, and Anda Distribution. The Actavis Pharma
segment provides generic, branded generic, and
over-the-counter (OTC) pharmaceutical products. This
segment sells generic prescription products primarily
under the Watson Laboratories, Watson Pharma, and
Actavis Pharma labels; and OTC generic products under
private label. The Actavis Specialty Brands segment
offers patent-protected products and trademarked
off-patent products, which are marketed as branded
pharmaceutical products to physicians, specifically
urologists, obstetricians, dermatologists,
gastroenterologists, and gynecologists. The Anda
Distribution segment primarily distributes generic and
selected brand pharmaceutical products, vaccines,
injectables, and OTC medicines to independent
pharmacies, and to alternate care providers comprising
hospitals, nursing homes, and mail order pharmacies, as
well as to pharmacy chains, physicians' offices, and
buying groups. The company also develops and
out-licenses generic pharmaceutical products primarily in
Europe through its third-party business; and provides
products in women's health, urology, gastroenterology,
and dermatology therapeutic categories. The company
has a collaboration agreement with Amgen, Inc. for the
development and commercialization of various oncology
antibody biosimilar medicines; and a collaboration
agreement with Hanmi Pharm. Co. Ltd. to develop
Hyalrheuma, a hyaluronic acid injection for arthritis pain
treatment. Actavis plc was founded in 1983 and is
headquartered in Parsippany, New Jersey.
ACTAVIS PLC
Morris Corporate Center III
Parsippany 07054
IRL
Phone: 862-261-7000
http://www.actavis.com
Beta
0.31
$66.4 Billion
52-Week Range
$153.42-$254.41
$250.38
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of ACT shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
FACTOR
SCORE
1.0
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, ACT has a growth score better than 10% of the
stocks we rate.
strong
5.0
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 90% of the companies we
cover.
strong
1.5
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 20% of the companies we review.
strong
5.0
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 90% of the stocks we monitor.
strong
4.0
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 70% of the companies we analyze.
strong
0.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. This company
pays no dividends.
strong
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
PAGE 3
November 9, 2014
NYSE: ACT
ACTAVIS PLC
NA
NA
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
3.49
13.57 E
16.51 E
Q4 FY14
2014(E)
2015(E)
Beta
0.31
$66.4 Billion
52-Week Range
$153.42-$254.41
$250.38
FINANCIAL ANALYSIS
ACTAVIS PLC's gross profit margin for the third quarter of its fiscal year 2014 has significantly increased
when compared to the same period a year ago. Even though sales increased, the net income has decreased,
representing a decrease to the bottom line. ACTAVIS PLC has weak liquidity. Currently, the Quick Ratio is 0.57
which shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from
the same period last year.
At the same time, stockholders' equity ("net worth") has greatly increased by 678.65% from the same quarter
last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial
difficulties could develop in the future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Q3 FY14
3,683.10
880.90
-57.30
-1,042.80
Q3 FY13
2,013.00
441.00
255.10
65.60
Q3 FY14
340.40
53,467.40
15,093.80
29,145.00
Q3 FY13
373.50
13,644.10
6,310.40
3,743.00
Q3 FY14
64.29%
23.91%
-1.56%
0.22
-1.95%
-3.58%
Q3 FY13
51.35%
21.90%
12.67%
0.56
-4.20%
-15.33%
Q3 FY14
1.40
0.34
132.10
-0.43
Q3 FY13
1.45
0.63
47.80
5.34
Q3 FY14
NA
0.00
-3.95
NA
NA
2,192,670
Q3 FY13
134
0.00
0.49
28.02
NA
2,376,754
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
PAGE 4
November 9, 2014
NYSE: ACT
ACTAVIS PLC
NA
NA
RATINGS HISTORY
Our rating for ACTAVIS PLC has not changed since
10/2/2013. As of 11/6/2014, the stock was trading at
a price of $250.38 which is 1.6% below its 52-week
high of $254.41 and 63.2% above its 52-week low of
$153.42.
HOLD: $146.38
HOLD: $83.10
BUY: $96.68
$250
$200
$150
$100
2013
$66.4 Billion
1
2
3
premium
To
Hold
Buy
Hold
Buy
(as of 11/6/2014)
49.24% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
5
1
2
3
4
Price/Book
1
2
3
premium
5
4
5
1
2
premium
3
4
5
ACT NA
Peers 5.92
• Neutral. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• Ratio not available.
21.25% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
DISCLAIMER:
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
3
4
5
discount
ACT NA
Peers 18.18
• Neutral. The P/CF ratio is the stock’s price divided
by the sum of the company's cash flow from
operations. It is useful for comparing companies
with different capital requirements or financing
structures.
Price to Earnings/Growth
1
2
3
premium
4
5
discount
ACT NA
Peers 0.62
• Neutral. The PEG ratio is the stock’s P/E divided by
the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
Earnings Growth
1
2
3
4
lower
5
higher
ACT 8.72
Peers 21.61
• Lower. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• However, ACT is expected to significantly trail its
peers on the basis of its earnings growth rate.
Sales Growth
discount
29.51% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
2
premium
discount
ACT NA
Peers 6.86
• Neutral. A lower price-to-book ratio makes a stock
more attractive to investors seeking stocks with
lower market values per dollar of equity on the
balance sheet.
Price/Sales
1
Price/CashFlow
discount
ACT 15.17
Peers 17.72
• Average. An average price-to-projected earnings
ratio can signify an industry neutral stock price and
average future growth expectations.
• ACT is trading at a valuation on par with its peers.
Price reflects the closing price as of the date listed, if available
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
4
ACT NM
Peers 29.64
• Neutral. The absence of a valid P/E ratio happens
when a stock can not be valued on the basis of a
negative stream of earnings.
• ACT's P/E is negative making this valuation
measure meaningless.
Price/Projected Earnings
From
Buy
Hold
Buy
Buy
$250.38
discount
premium
MOST RECENT RATINGS CHANGES
Date
Price
Action
10/2/13
$146.38 Downgrade
4/2/13
$96.68
Upgrade
2/20/13
$83.10 Downgrade
11/6/12
$87.44 No Change
52-Week Range
$153.42-$254.41
VALUATION
HOLD. The current P/E ratio is negative, which has no meaningful value in the assessment of premium or
discount valuation, it simply displays that the company has negative earnings. Due to the lack of price
valuation ratios for ACTAVIS PLC, we cannot determine the premium or discount status of the shares at this
time.
Price/Earnings
2 Year Chart
BUY: $87.44
Beta
0.31
1
2
3
lower
4
5
higher
ACT 54.07
Peers 11.15
• Higher. A sales growth rate that exceeds the
industry implies that a company is gaining market
share.
• ACT has a sales growth rate that significantly
exceeds its peers.
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
PAGE 5

HOLD ACTAVIS PLC ACT

Transcription

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