Have some widely owned health care names hit a wall when it comes to growth and earnings? In a research report issued today, Credit Suisse Group Inc. (NYSE: CS) issues some not very enthusiastic coverage on three large cap pharmaceutical stocks, including two downgrades, as well as downgrading a leading medical technology company.
Research coverage on drug giant Pfizer Inc. (NYSE: PFE) is reinstated with a Neutral rating and a $29 price target. The stock, which is up more than 60% from the August 2011 lows, is a favorite of many Wall St. analysts. The Credit Suisse team thinks that the stock repurchase program and restructuring efforts are largely priced in to the name. While they feel that Pfizer has taken advantage of global opportunities since its acquisition of Wyeth in January of 2009, the stock is fully valued at these levels.
Johnson & Johnson (NYSE: JNJ) is downgraded to Underperform from Neutral. This sell rating comes as the analysts view the company as having the lowest total return potential in its coverage universe. While they raise their price target to $73 from $71, below yesterday’s close of $75.39, the call is again a valuation one.
Coverage is also initiated on AbbVie Inc. (NYSE: ABBV) with a $37 price target. The Credit Suisse team sees very tepid 2% to 3% earnings growth over the next seven years for this company known for its Humira franchise for arthritis treatment. While the Humira franchise is strong, it dominates the earnings picture at the company. The analysts also see very little contribution from the current pipeline.
Medical technology company Stryker Corp. (NYSE: SYK) is downgraded from Outperform to Neutral, and the price target remains at $67. Again, while they see a good franchise and a strong business model, this is another valuation call. After solid stock performance, the analysts see less than 10% upside from current levels.
Credit Suisse still advocates investors owning and having overweight positions in pharmaceutical stocks. However, today’s call is clearly a taking profit and valuation move while looking for more upside in other names.