Allergan 'Very Attractive' After Buybacks, Dividend Increase -Cramer Says
Shares of Allergan plc (AGN) - Get Report rose on Monday, Sept. 25, after the drug maker's board authorized a $2 billion share buyback program.
The news came after the Dublin-based company recently completed repurchasing $15 billion of stock.
Allergan also affirmed its commitment to raising its dividend annually and to pay down $3.75 billion of debt in 2018. The company had about $29.9 billion in debt as of Dec. 31.
In addition, the firm reiterated its full-year guidance, including its third-quarter revenue guidance. The company expects a GAAP net loss of between $10.80 and $11.20 per share for 2017. On a non-GAAP basis, it sees earnings between $16.05 and $16.45. It expects full-year net revenue to between $15.85 billion and $16.05 billion.
Allergan's shares rose 3.8% to $212.42 in midday trading on Monday.
"These two developments confirm that the stock's recent selloff has made Allergan shares very attractive," wrote Jim Cramer in a note to Action Alerts PLUS subscribers Monday, referring to the buyback news and the reaffirmation of guidance. "With the company's shares trading very cheap relative to its peers, and management signaling confidence in the company, we see current price levels as a great opportunity to add to our position."
Cramer owns Allergan through the Action Alerts PLUS charitable trust portfolio.
"The bears have largely predicated their rationale to sell the stock on expectations that management will be lowering their financial guidance in the upcoming quarter," Cramer continued. "With this announcement confirming that AGN is on track to reach their financial estimates for the year, we believe that this eliminates a focal point for the sellers."
In a note on Monday, Sanford C. Bernstein & Co. LLC analyst Aaron Gal pointed out that Allergan has committed the majority of its $6.7 billion in estimated cash flow for 2018 for "non-deal uses."
The announcement "signals no large 2018 deals and very positive use of cash," Gal wrote, adding that "between EV shrinking and the dividend, this is a $6.5 billion cash return on an EV basis of about $90 billion."
In a separate news release, Allergan said chief financial officer Tessa Hilado plans to retire from the company and will remain in her role while Allergan looks for her replacement.
Hilado, an alum of firms including PepsiCo Inc. (PEP) - Get Report and General Motors Co. (GM) - Get Report , joined Actavis plc as CFO in December 2014. Actavis in March 2015 completed its acquisition of Allergan Inc. and two months later, Actavis adopted the Allergan name.
In a statement on Monday, Hilado said that now "is a good time to announce my retirement from Allergan so that we have time to identify my successor and orchestrate a smooth hand-off to continue Allergan's progress."
She said that when she joined the company, she promised chairman and CEO Brent Saunders that she would stay for three years "to help transform the finance organization, institute better systems and financial controls and improve the balance sheet."
"I am proud of the improvements we have made in each of these areas and the talent that we have attracted to our finance organization over that time, including new leaders for Commercial Finance, Tax, Research & Development Finance and Investor Relations & Strategy," Hilado said.
During her time as CFO, Allergan in August 2016 completed the sale of its generic drug business to Teva Pharmaceutical Industries Ltd. (TEVA) - Get Report for $33.4 billion in cash and $5.4 billion in Teva stock.
Allergan has done several acquisitions, including the $2.5 billion purchase of Zeltiq, the medical technology company behind the body contouring CoolSculpting System, in a deal completed in April. The company's other recent M&A activity include its $2.9 billion purchase of regenerative medicine company LifeCell Corp. from Acelity LP Inc. in a transaction completed in February and its November acquisition of clinical stage biopharmaceutical company Chase Pharmaceuticals Corp. for $125 million upfront plus potential regulatory and sales milestone payments.
In November, Allergan also completed its purchase of Tobira Therapeutics Inc. for an upfront payment of about $595 million and potential additional consideration. Other deals include the acquisition, completed in October, of clinical stage biotech Vitae Pharmaceuticals Inc. for about $639 million.
-- Kinsey Grant contributed to this article
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