Mizuho Remains Buyer of Mallinckrodt PLC (MNK) Following F4Q:16 Results

In a research report published Wednesday, Mizuho Securities analyst Irina Rivkind Koffler reiterated a Buy rating on shares of Mallinckrodt PLC (NYSE:MNK) with an $85 price target, after the company reported a decent fiscal fourth quarter results.

However, while performance for the Specialty Brands business was solid, performance for Specialty Generics was weaker than expected, and management expects continued pressure on sales and gross margin for the business in the coming quarters. While the outlook is less attractive than before, Koffler still views MNK as undervalued.

Koffler commented, “The weakness in generics highlights the company’s need to pursue accretive deals to drive future top line growth as its branded business stabilizes. This need may result in an expensive deal and this possibility may already be concerning to investors, and could keep the stock range-bound. We are also sensitive to this outcome yet still view shares as undervalued using several methodologies. If we apply an 8x P/E to 2017 EPS of $8.06, we arrive at a ~$64 PT. This values MNK in line with its price-pressured/heavily levered spec-pharma peers. If we think about a sale of the business and utilize a SOTP analysis, we arrive at a hypothetical value of $67/share; and if we assume no terminal growth for the company we arrive at a $68 PT using DCF. Using these methodologies highlights the ~22-30% upside in MNK.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Irina Rivkind Koffler has a yearly average return of 16.1% and a 48.2% success rate. Koffler has a -19.8% average return when recommending MNK, and is ranked #92 out of 4241 analysts.

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