Allergan Fundamentals Remain Strong

From a fundamental standpoint, we are enthusiastic about the future of Allergan, Inc. (AGN). Although the company recently offered up a lower-than-expected outlook for 2009, we still think Allergan will be able to face the global economic weakness and foreign currency headwinds well, and will be back to its historical mid-to-high teens earnings growth trajectory in 2011.

The company’s fundamentals remain strong and we consider Allergan to be one of the premier specialty pharmaceutical companies in the market.

The company possesses a strong blockbuster product in Botox and a slew of innovative new products in the eye and skin care markets. Allergan has also been pretty active on the acquisition front over the past few quarters. We believe these acquisitions will provide the company with the opportunity to drive growth in its existing business and to expand into new areas of business.

Even in the face of slowing consumer spending, Allergan’s presence across different segments and geographies should help maintain decent growth going forward.

We have adjusted our model based on the full year results and 2009 guidance provided by the company. The company expects 2009 adjusted diluted EPS in the range of $2.69 – $2.75 on total product net sales of $4.1 – $4.3 billion.

Although we have cut our forward estimates on this news, we still see the company delivering decent top-and bottom-line growth (EPS CAGR of 13% through 2012). Based on our model, we see Allergan delivering EPS of $2.72 in 2009, up 6% y-o-y.

Beyond that, the company’s impressive pipeline should help drive growth in the next decade. We believe Allergan is a good stock to own in the long run. As such, we maintain our Hold rating with a $52 price target.

The shares received a boost recently on takeover speculation. Given the recent wave of consolidation in the industry, Allergan is certainly an attractive target. Our target price is based on 19x our 2009 EPS estimate of $2.72.

Read the full analyst report on “AGN”
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