Though Schering-Plough (SGP) has performed well since its upgrade to a Buy roughly a year and a half ago, Zacks senior pharmaceuticals analyst Jason Napodano, CFA sees even more room for upside in the next six months. We pulled the following from his most recent Buy report:
“Schering-Plough is engaged in the development, manufacturing and marketing of pharmaceutical products around the world. The company focuses on prescription drugs, animal health, foot-care and sun-care products. Lead products include its antihistamine franchise Claritin/Clarinex and a cholesterol-lowering joint-venture therapy treatment (Vytorin) with Merck (MRK).
“The turnaround is complete at SGP. The company should deliver the highest four-year earnings growth rate in the large-cap pharmaceutical industry. Valuation becomes attractive based on recovery EPS [earnings per share] in 2008 and 2009. The company recently announced it will acquire Organon Bio for $14.4 billion in cash/debt/equity. We recommend investors buy the name up to $28.
“Our Buy rating is based on the strong earnings growth and attractive valuation based on recovery 2009 EPS of $1.44 – without Organon. Based on this 2009 EPS, the stock is currently trading at 17.0x earnings. This is a premium to the 13.5x 2009 EPS at which the rest of the large-cap pharmaceutical group trades. However, Schering-Plough will see EPS growth in 2009 of nearly 14%, over twice that of the peer-group.”