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Perrigo's CEO Resigns, Trims 2016 Outlook, Stock Tumbles

Putting an end to rumors that surfaced late last week, Perrigo Company plc PRGO confirmed the resignation of Chairman and CEO Joseph C. Papa. And if this wasn’t enough, the company also trimmed its earnings outlook for 2016 and announced weak preliminary first-quarter 2016 results.

Both the quarterly and full-year projections were below estimates. Perrigo’s shares plunged 18.1% on this string of disappointing news.

Joseph Papa to Rein Valeant Pharma

With Joseph Papa departing, Perrigo’s Board of Directors promoted John T. Hendrickson as the CEO effective immediately, who all this while served as the President of the company. In the midst of management changes, the Board also announced separating the roles of CEO and Chairman of the Board and therefore selected Independent Director Laurie Brlas to the role of Chairman of the Board.

Meanwhile, Valeant Pharmaceuticals International, Inc. VRX announced that Joseph Papa will take the reins of the company as both the Chairman and CEO from early next month.

Outlook for 2016 Lowered

Perrigo lowered its earnings guidance for 2016. The company now expects 2016 earnings in the range of $8.20 to $8.60 per share. This is significantly lower than the Zacks Consensus Estimate earnings of $9.55 per share and the previously guided range that was provided with the fourth-quarter 2015 earnings results. The company had guided 2016 earnings in the range of $9.50 to $9.80 per share.

The company said that the cut in the earnings guidance is owing to a reduction in pricing expectations in the Rx segment due to industry and competitive pressure in the sector. The remainder of the reduction is mainly due to a weaker performance expected within the Branded Consumer Healthcare (BCH) segment over the next three quarters as well as lower expectations for consolidated new product launches.

Perrigo said that it is also currently assessing a possible impairment charge associated with the BCH business, which was created following the Mar 2015 Omega Pharma acquisition.

Preliminary 1Q16 Results

Perrigo announced preliminary results for the first quarter of 2016. The company estimates earnings in the range of $1.71 to $1.77 per share on net sales of $1.33–$1.35 billion. While the Zacks Consensus Estimate for earnings currently stands at $1.89 per share, that of revenues is $1.42 billion.

Perrigo will provide details on its quarterly performance while reporting first-quarter results, which is scheduled for May 12.

Perrigo is currently a Zacks Rank #4 (Sell) stock. A couple of better-ranked stocks in the health care sector are Emergent BioSolutions, Inc. EBS and Gilead Sciences Inc. GILD, each sporting a Zacks Rank #1 (Strong Buy).

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PERRIGO CO PLC (PRGO): Free Stock Analysis Report
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