Perrigo's COVID-19 Acetaminophen Benefit Likely Unsustainable; Maintain No-Moat Rating and FVE

Perrigo announced preliminary first-quarter revenue of $1.3 billion and non-GAAP operating profit of $220 million-$225 million including the consideration of $4 million of supplemental employee benefits. The implied non-GAAP operating margin of 17% is comparable with the prior year but roughly 200 basis points ahead of consensus as tracked by Capital IQ. We estimate the preliminary non-GAAP operating profit translates into roughly $0.11 upside to first-quarter consensus estimates of $1.00 per share as tracked by CapIQ. We view the quarter as largely benefited by COVID-19 and think the stronger-than-anticipated results are not likely to be sustainable throughout the year. As a result, we maintain our $40 fair value estimate and no-moat rating. Management maintained its prior guidance for net sales growth of 6%-7% and non-GAAP earnings per share of $3.95-$4.15 as there is still much uncertainty regarding the current operating environment.