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Shares of Omnicare Inc. traded higher Wednesday after a Credit Suisse analyst upgraded the stock, saying the long-term pharmacy should have a strong 2012.
THE SPARK: Analyst Glen Santangelo raised his rating on the shares to "Outperform" from "Neutral" and increased his price target to $39 per share from $34. Omnicare shares have declined as its attempt to buy competitor PharMerica Corp. has foundered. Last month, the Federal Trade Commission sued to stop the deal, claiming that it would lead to higher drug prices.
Santangelo thinks the stock will bounce back as Wall Street begins to focus on the positives for Omnicare.
"While the FTC decision regarding PharMerica was clearly disappointing, we believe investors will begin to reward the shares for the combination of improving operations, accelerating generic wave, and additional capital deployment that will enable Omnicare to at least meet and potentially exceed 2012 consensus expectations," Santangelo said.
The Covington, Ky., company is scheduled to report its fourth-quarter results on the morning of Feb. 23. Analysts expect Omnicare to post a profit of 56 cents per share and $1.53 billion in revenue, according to FactSet.
THE BIG PICTURE: Omnicare went public in August with its effort to buy PharMerica for $457 million, or $15 per share, in cash. PharMerica has said the offer was too low. Omnicare's tender offer expires Friday, and Santangelo said the company will have to divulge its plans. He said Omnicare probably won't pursue the deal in court even though the company has said it disagrees with the FTC's view.
SHARE ACTION: Omnicare shares picked up $1, or 3 percent, to $34.26 in afternoon trading. The stock is down 5.9 percent since Jan. 12, when reports began to circulate that the FTC would move to block the PharMerica deal.