Irish Law May Force Allergan To 'Gradually' Buy Back Shares

Allergan plc Ordinary Shares (NYSE: AGN) reported Q1 results with revenue below estimates but non-GAAP EPS beating expectations.

Morgan Stanley’s David Risinger maintained an Overweight rating on the company, with a price target of $300.

Allergan reported revenue of $3.8 billion, with non-GAAP EPS of $3.04. Operating cash flow was robust at $1.2 billion, a significant rise from the $525 million reported for 1Q15.

However, U.S. Brands, U.S. Medical Aesthetics, International Brands and Distribution sales came in below the estimates.

2016 Guidance

Management reaffirmed its 2016 guidance of revenue of $17 billion, which is above the consensus expectations and in-line with the estimate.

R&D expenses were guided to $1.5 billion, in-line with the estimate, with SG&A as a percentage of the revenue at 25 percent, reflecting Allergan’s restructuring plans.

Share Buybacks

The company has an ongoing share buyback authorization worth $10 billion, including buybacks worth $4-$5 billion over six months.

“As we understand it, no Irish company has ever been able to structure an ASR (accelerated share repurchase), and mgmt considered trading volumes as part of its planning,” the analyst mentioned.

The analyst believes management intends to buyback shares gradually “because the company does not want to drive shares higher via open market purchases.”