Allergan Still Undervalued After Updated Outlook

We think the $15.25 adjusted EPS floor (up from $15 previously) still looks somewhat conservative given management’s recent $300 million to $400 million cost-savings plan led by a 1,000-position workforce reduction. Additionally, management sees limited tax rate exposure to the recent U.S. bill, with a non-GAAP rate near 15%. While management’s expectation of 5% annualized revenue growth between 2017 and 2022 is above our forecast, we do anticipate a return to mid-single-digit growth after the hit of generic competition in 2018. Additionally, management’s estimate that Botox and the aesthetics business will represent 45% of revenue by 2022 matches our current prediction.

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