Everything seems to be Hunky-Dory. Rumor and innuendo right now seems to have control of this stock. We'll go back to the 50s and 60s when the FDA issues are cleared up.
Article from CBS Marketwatch follows.
Doughboy
WATSON REBOUNDS
CORONA, Calif. (CBS.MW) -- Shares of Watson Pharmaceuticals
rebounded Thursday after the company said it sees second-quarter
earnings and revenue in line with market expectations.
Shares of the Corona, Calif.-based specialty pharmaceuticals maker
(WPI: news, msgs) rose 2 7/8 or 8.2 percent to 37 15/16.
On Thursday, the company issued a press release
in response to what it said it believes was
"misinformation in the marketplace concerning its
quarterly results," though it didn't specify what the
misinformation was.
Watson officials weren't available to comment. The
company has scheduled a conference call for
analysts Thursday afternoon.
Watson is expected to report earnings of 43 cents
a share in the second quarter, based on a survey by
First Call of 8 analysts.
Flurry of rumors
On Wednesday, Watson shares dropped about
11 percent on heavy volume of about 6.7
million shares. A flurry of rumors in the
marketplace put pressure on the stock in
Wednesday's session, analysts said.
According to a story Wednesday on TheStreet.com web site, those
rumors included FDA concerns about "numerous quality control
issues" at Watson plants, slowing growth, a falling stock price and
other negatives.
In April, Watson said it took steps to address concerns in FDA
warning letters it received about plants in Miami and Corona,
Calif.
Further, the TheStreet.com story said there was talk Wednesday
that an unnamed Donaldson, Lufkin, Jenrette analyst said Watson
would miss its second-quarter numbers.
Ken Kulju, who covers Watson for DLJ, was traveling in Europe
and wasn't available to comment Thursday. The analyst left for
Europe Tuesday, his office said.
On Wednesday,
Watson issued a
press release
addressing inquiries
about the stock's
decline. In its
statement it said it
doesn't comment on
rumors nor would it
make projections
relative to earnings prior to the end of the quarter.
Also on Wednesday, the company said its chief executive officer
Allen Chao had been diagnosed recently with early-stage stomach
cancer and had undergone successful surgery. The company said
Chao will undergo chemotherapy.
"Throughout this entire period, I have been involved in key
management decisions," Chao said in the statement. "I plan to
continue this same level of involvement going forward," he said.
Watson also said it named its current senior vice president of sales
and marketing, Fred Wilkinson, as Chief Operating Officer,
reporting to Chao.
Progress toward new high?
On Thursday, Gruntal & Co. analyst David Saks downplayed
concern, saying operations at Watson "appear to be progressing
well toward new highs in sales and earnings" and greater
profitability.
He said investors should be encouraged to buy the stock while it's low,
citing pending FDA approval of new products, insider buying, 22 percent
EPS growth in the second quarter and 30 percent growth for the fiscal
year as potential catalysts. Saks also said there is an "apparent
near-resolution of FDA compliance issues, which appear far overstated."
Nonetheless, Saks lowered his 12-month price target to $60 from $65 a
share "simply to reflect the lower share price base of $35," he said.
He said he sees Watson shares reaching the $90 to $100 range by 2003,
with a preliminary EPS estimate of $3.67.
Saks also said past speculation that Watson is a merger target could
resurface.
Watson develops and sells proprietary and off-patent pharmaceuticals.
Stephanie O'Brien is a reporter for CBS MarketWatch. |
