Perrigo Discount Widens After U.S. Stock Jumps: Israel OvernightLeslie Picker
Perrigo Co.’s Tel Aviv-traded stock is at the biggest discount to its U.S. shares of any dual-listed Israeli company after the drugmaker snapped a six-day decline in New York.
Shares of Perrigo rose 0.9 percent in New York May 24, widening its premium to the stock traded in Israel to $1.77, the biggest since May 15. The Bloomberg Israel-US Equity Index of U.S.-traded Israeli equities dropped 2.1 percent last week, led by an 8.6 percent slump in Allot Communications Ltd.
Perrigo dropped as much as 2.6 percent since reaching a record on May 15 and traded at 18.2 times estimated earnings at the end of last week, or 3.6 percent above its five-year average, according to data compiled by Bloomberg. The stock is “extremely stretched,” Jonathan Krinsky, an analyst at Miller Tabak & Co. in New York, wrote in a May 21 note. The shares fell for six days in New York before rebounding on May 24, on bets sales will jump to a record $3.58 billion this year, based on the mean estimate of 16 analysts surveyed by Bloomberg.
“People correlate Perrigo as a defensive play,” Randall Stanicky, an analyst at Canaccord Genuity Inc., who rates the shares a buy, said by phone from New York May 24. “You’re going to get first-time fiscal 2014 guidance when they report mid-August, which I think is going to be a strong year.”
The drugmaker’s sales will jump 13 percent to $4.03 billion in 2014, according to the average of 16 analysts’ estimates compiled by Bloomberg. Perrigo reported third-quarter sales of $919.8 million, an increase of 18 percent from 2012, the biggest gain in two years, according to a May 7 statement.
Perrigo’s consumer health-care business, which made up 57 percent of its revenue in 2012, will not be strong enough to drive shares to outperform, according to Jason Gerberry, an analyst at Leerink Swann & Co.
“This is a stock that trades around the quarters and is very sensitive to its consumer business,” Gerberry, who has a hold rating for the shares, said by phone from Boston on May 24, “We expect results to be in line and don’t expect them to be anything major for the stock.”
Perrigo, which entered Tel Aviv’s TA-25 Index after buying B’nei Brak, Israel-based Agis Industries Ltd. in 2005, advanced 1.5 percent to 439.4 shekels, or $118.88, at 10:04 a.m. in Israel. Israel’s benchmark gauge gained 0.3 percent to 1,219.51.
The Bloomberg Israel-US Equity Index declined 2.1 percent last week to 91.70.
Orbotech Ltd., based in Yavne, Israel, surged 14 percent last week, the most in four years, to $11.60. The maker of gear used to test consumer electronics had the biggest gain on the Israel-US Equity Index.
Allot, a maker of technology used by telecommunications providers to track wireless traffic, slumped to $12.15, a three-week low. The Hod Hasharon, Israel-based company’s shares in Tel Aviv this morning dropped 3.2 percent to 45.25 shekels, or $12.24.
The shekel fell for a third-straight week, retreating 0.8 percent to 3.6962 versus the dollar. The Israeli currency weakened on investor bets that the central bank will cut interest rates for a second time this month.