Stocks in the News: Pharma Continues to Profit

Posted: Sep 17, 2013 12:01 AM
Stocks in the News: Pharma Continues to Profit

Stock number one is: 

Packaging Corp. of America, (SYMBOL: PKG) and the headline says: Packaging Corp. to Buy Boise for $1.27 Billion to Add Mills -- Bloomberg

Containerboard-manufacturer Packaging Corp. will purchase Boise Inc. for $12.55 per share, and will assume Boise’s debt, in a deal valued at $1.27 billion.  The deal dramatically increases Packaging Corp.’s production capacity and geographical presence.

The company is expecting earnings to grow 48% this year, and the stock price had a corresponding 82% run-up in the last twelve months.  However, earnings growth is projected to slow to 15 and 10 percent in the next two years.  The PE is 19 and the dividend yield is 2.7%.

The stock broke out on the upside again today.  We would be cautious with the stock, based on the huge run-up and dramatically slowing earnings growth.

Our Ransom Note trendline says:  HOLD PACKAGING CORP.

PKG Chart

PKG data by YCharts

Stock number two is: 

Alexion Pharmaceuticals, Inc. (SYMBOL: ALXN) and the headline says: Alexion's Soliris Receives Marketing Approval in Japan -- MarketWatch

Alexion Pharmaceuticals has been approved to treat a rare and life-threatening kidney disorder in Japan.  The drug, which is already available in the U.S. and Europe, will be the first pharmaceutical treatment made available to patients with this genetic disease, who often otherwise face kidney failure.  Alexion remains a potential takeover target of Swiss Pharmaceutical company Roche Holding.

Wall Street expects Alexion to increase earnings per share 42% in 2013, then slow down to 10% growth next year.  The PE is 38.

The stock price is up 30% since we said “buy” in February; currently in a sideways trading pattern.

Our Ransom Note trendline says..... HOLD ALEXION PHARMACEUTICALS.

ALXN Chart

ALXN data by YCharts

Stock number three is:

Williams-Sonoma Inc., (SYMBOL: WSM ) and the headline says: Citi’s Proprietary Survey on Furniture Trends Indicates Improving Sales – Citi Research

Citi Research is reporting that a survey of six major U.S. retailers shows increased sales for the third quarter over the second quarter, noting promotional pricing and increased product quality.  The housing recovery is leading 85% of customers to make kitchen and living room purchases, both trends benefitting Williams-Sonoma’s wholly-owned Pottery Barn.  Citi also likes Williams-Sonoma longer-term for international expansion, and the stock appears on Citi’s U.S. Focus List.

Full-year earnings estimates have recently increased to 9% growth this year, then 14 and 15 percent in the next two years.  The PE is 20, and the dividend yield is 2.2%.

The stock is trading between $55 and $61, and appears stable and fully valued.

Our Ransom Note trendline says....  HOLD WILLIAMS-SONOMA.

WSM Chart

WSM data by YCharts

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis. 

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