Why Perrigo Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of generic-drug maker Perrigo (NAS: PRGO) were making investors ill today, falling as much as 10% after a disappointing earnings report.

So what: A top-line miss was the big news here. Perrigo managed to grow sales 18% to $832 million, but that was well short of the $856 million analysts were expecting. Earnings per share came in $0.02 ahead of the experts at $1.28, however, and the company provided full-year guidance of $5.30 to $5.50, indicating a slowdown from its previous fast-paced growth. Management did not acknowledge any weakness in its press release, and pointed to opportunities in its acquisition of CanAm Care, newly signed supply agreements for infant formula in China, and other new product launches as well.

Now what: Investors may be justified in their concern about Perrigo's long-term growth after today's revenue miss. EPS guidance for next year only represents an increase of 6% to 10%, which seems low for a company with a P/E around 22. If this pharmaceutical continues to miss sales expectations in upcoming quarters, that should be a sign for investors that it's time to check out.

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The article Why Perrigo Shares Dropped originally appeared on Fool.com.

Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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