Perrigo CEO downplays potential for Amazon in consumer health as OTC specialist displays big progress

Perrigo Thursday reported third quarter results that were significantly higher than Wall Street expectations for the OTC and consumer health specialist.

With everyone wondering if Amazon is going to jump whole-hog into selling medication over the internet, it was inevitable that CEO John Hendrickson would be asked what the implications are for Perrigo. And his assessment is that in the OTC and consumer health space where the Dublin company specializes, selling online is a tough go.

In a call with analysts after Perrigo reported earnings that far surpassed most analyst projects, Hendrickson said he would not expect a sudden and dramatic shift in consumer buying habits from having an e-retailing giant like Amazon in the space.

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The needle might move if a major disrupter put a lot of “marketing muscle” into it, but short of that, it will be a slow build, he told analysts. That is, Hendrickson said, because “when you want to cure a migraine headache or do something and you go to your pantry and it's not there, you run to the store and get it. It's sort of a, used as needed.”

What Hendrickson could get excited about were Perrigo’s third-quarter earnings that surprised Wall Street and allowed the company to raise its 2017 guidance. Its reported revenue of $1.22 billion, solidly above forecasts of $1.17 billion.

Its earnings per share came in at $1.39, well above consensus of $1.11. As a result it upped its full-year guidance to EPS to a range of $4.80 to $4.95 from a range of $4.45 to $4.70 that it earlier projected.

In a note to clients, Wells Fargo analyst David Maris called the results “a dramatic turnaround from the previous year” noting significant improvements in sales and margins from the second quarter of 2017.

“While it has taken a great deal of time, and PRGO still has some legacy issues, it is good to see that the focused effort of restoring PRGO has taken root and is showing significant progress in putting behind it the issues caused by several years of what we consider mismanagement by the previous management team.” Maris said.

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The results were a vindication, of sorts, for Hendrickson. When earlier this year he said he intended to retire now that the company was “stabilized,” many analysts found his assessment of the company’s standing a bit too optimistic. RBC Capital Markets even downgraded the stock to underperform because of its ongoing problems.

On Thursday Stanicky acknowledged to clients that move “proved wrong.” While analysts at RBC had been cautious about consumer health concerns and “high expectations, PRGO delivered a solid quarter with little to push back on.”