Smith Barney Cuts Endo to 'In-Line'

Analyst Angela Larson says the earnings were good quality, but she still expects generic competition for key drugs

Smith Barney downgraded Endo Pharmaceuticals (ENDP ) to in-line from outperform on valuation.

On Thursday the company posted 12 cents first quarter earnings per share (GAAP), and upped the 2003 guidance to 90 earnings per share (excluding items) on $495 million in sales. Analyst Angela Larson says the first quarter earnings per share, which excluded one-time non-cash items that totaled 35 cents, beat her estimates. She views the earnings per share upside as good quality, driven by sales. Larson notes Endo upped the 2003 guidance, but still expects generic competition for key products Percocet and morphine sulfate.

Larson says the 2003 estimates meet her guidance. For 2004, she sees four product launches, which raises her target to $17.50 but cuts the 94 cents earnings per share to 87 cents on launch costs. Given the $17.50 target, she downgraded based on the price.

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