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Undervalued Perrigo: Turnaround or Lingering Risk?
8 Dec
Summary
- Perrigo faces a wave of lawsuits and a lowered 2025 outlook.
- Company shares have seen a sharp decline over the past three months.
- Operational initiatives aim for $150M-$200M in savings and margin improvement.
Perrigo finds itself in the spotlight due to a series of class action lawsuits and recent weak quarterly performance, which have prompted a downward revision of its 2025 outlook. This has significantly impacted investor confidence, evidenced by substantial negative returns in the company's share price over the past three months and one year, signaling a reassessment of its risk profile.
The company's fair value is estimated at $21.50, contrasting with its recent closing price of $13.44. This valuation gap suggests the market may be heavily discounting its recovery potential. Perrigo is implementing operational initiatives, including Project Energize, aimed at achieving $150 million to $200 million in savings. These savings are intended to fuel innovation and strategic investments to bolster gross margins and future net earnings.
However, the path to recovery is not without obstacles. Persistent challenges in the infant formula sector and subdued demand for over-the-counter products could jeopardize these plans, potentially necessitating a recalibration of growth expectations and valuation. Investors are weighing whether Perrigo is a severely punished company poised for a comeback or if current market pricing accurately reflects ongoing growth concerns and legal entanglements.
