Watson Pharmaceuticals, Inc. (WPI) has been riding an incredibly smooth trend higher for most of the last 12 months, recently hitting a new all-time high on strong Q1 results that came in ahead of expectations. With estimates on the rise, and a bullish growth projection, this Zacks #1 Rank stock has plenty of momentum.
Company Description
Watson Pharmaceuticals, Inc. develops and manufactures both generic and branded pharmaceutical products with a specialty in urology and womens health. The company was founded in 1983, operates worldwide and has a market cap of $8.71 billion.
Watson has been riding an incredibly smooth trend line higher for the last year. But shares got an extra boost in late April after the company reported another solid quarter that came in ahead of expectations.
First-Quarter Results
Revenue for the period was up 9% from last year to $216 million. Earnings also looked good, coming in at 89 cents, 3.5% ahead of the Zacks Consensus Estimate.
The company’s Generics segment led the way, where sales were up 10% from last year and gross margin expanded 160 basis points. It’s branded business was also solid, with revenue up 6% and adjusted gross margin of 81.6%.
Financial Profile
Watson has also been able to further insulate its already strong balance sheet, with cash and short-term investments up $333 million from last year to $515 million while total debt fell $223 million to $1.02 billion.
Estimates
We saw some decent movement in estimates off the good quarter, with the current year adding 17 cents to $4.31 and the next-year estimate gaining 36 cents to $5.54, a bullish 28% growth projection.
Valuation
But in spite of the string of gains, the valuation picture looks solid, with a PEG ratio of .57, well below the benchmark of 1 for value.
12-Month Chart
On the chart, it’s been almost a straight shot higher for most of the last year. Look for support from the trend line on any weakness. Take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.
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