NEW YORK (TheStreet) -- Shares of Allergan (AGN - Get Report) are up 0.16% to $166.33 in pre-market trade as the health care company looks to make changes aimed at increasing profit in the coming months as well as forecasts for future years to convince shareholders that the company is better as a standalone investment, Bloomberg reports.
The Botox maker, being pursued by Valeant Pharmaceuticals International (VRX - Get Report) and Bill Ackman's hedge fund, will shelve unpromising pipeline drugs and overhaul management incentives, sources said.
A broad restructuring plan set to be outlined during Allergan's earnings announcement later this month will also involve company-wide cost cuts, including some legacy expenses, sources said. Management compensation will be more closely tied to achieving higher forecasts, Bloomberg noted.
TheStreet Ratings team rates ALLERGAN INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ALLERGAN INC (AGN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 12.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.69, which clearly demonstrates the ability to cover short-term cash needs.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 1958.4% when compared to the same quarter one year prior, rising from $12.50 million to $257.30 million.
- Net operating cash flow has increased to $165.80 million or 38.62% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.55%.
- ALLERGAN INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALLERGAN INC increased its bottom line by earning $4.20 versus $3.57 in the prior year. This year, the market expects an improvement in earnings ($5.70 versus $4.20).
- You can view the full analysis from the report here: AGN Ratings Report