Allergan Third Quarter Earnings Preview

Allergan (NYSE:AGN) will release its third quarter results on Tuesday, October 30, 2012. Analysts are expecting the company to report a profit of $1.04 a share, up from 92 cents a year ago.



A business' earnings are the main determinant of its share price because earnings and the circumstances relating to them can indicate whether the business will be profitable and successful in the long run. SEE: Can Earnings Guidance Accurately Predict The Future?

What to Expect: Analysts are expecting Allergan to report earnings of $1.04 per share, up 13% from a year ago, when the company reported earnings of 92 cents per share.

The consensus estimate, while unchanged in the past month, is down from $1.06 three months ago. Analysts are expecting earnings of $4.16 per share for the fiscal year.

Revenue is expected to exceed last year's figure of $1.33 billion by 7.6% and come in at $1.43 billion for the quarter. Revenue for the fiscal year is expected to come in at $5.82 billion.



Company Performance: These last four quarters have marked revenue growth. It rose 5.2% in the second quarter, 9.5% in the first quarter, 7.1% in the fourth quarter of the last fiscal year and 9.9% in the third quarter of the last fiscal year.

Compared to the industry average of 14.48, AGN's P/E ratio of 26.6 is quite high. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: The P/E Ratio: A Good Market-Timing Indicator



Over the past quarter, the stock price has risen to $90.56 from $86.25 on July 27, 2012. Allergan's best recent streak was when its price gained $5.87 per share between September 6, 2012 and October 18, 2012.





The Competition: Allergan is a global specialty health care company. It discovers, develops, and commercializes innovative pharmaceuticals, biologics, and medical devices, as well as over-the-counter products. Most analysts (15 of 24) rate Allergan a buy. They have become increasingly pessimistic about the stock, as the number of buy ratings has dropped slightly over the last three months.

The company's closest competitor in the biotechnology and drugs industry is Johnson & Johnson (JNJ). Analysts are more optimistic about Allergan than about Johnson & Johnson. Only 14 out of 22 analysts rate the latter a buy.