Perrigo Reports Another Quarter With Numerous Puts and Takes, Irish Tax Woes Remain an Overhang

No-moat Perrigo reported another quarter with significant puts and takes complicated by the usual acquisition and divestiture noise further muddied by the pandemic, but we don’t expect any major changes to our fair value estimate based on the results. Management remains active in the M&A market to manage its offerings across its three distinct segments, but these efforts will likely be thwarted as the firm is pressed for concessions by its retail customers that continue to struggle through the pandemic. As volumes stabilize, the company has started to replenish its inventory. Management plans to resume aggressive marketing campaigns that were paused to offset incremental operating costs born by the pandemic to the tune of $20 million-$25 million. Any emerging positive trends in the Americas remain overshadowed by the uphill tax battle in Ireland and challenges in the other two segments. The current $2 billion tax liability is associated with the sale of MS drug, Tysabri, that accompanied the 2013 Elan acquisition.