NEW YORK (AP) – Wells Fargo has upgraded its rating of Watson Pharmaceuticals, citing the company’s acquisition of a former competitor.

Analyst Michael Tong raised his rating to “Outperform” from “Market Perform.” The company’s stock price has declined in the last month, but Tong said he now believes Watson will report a bigger profit in 2013 on greater sales of generic drugs, lower depreciation costs, and reduced debt. The analyst said the Parsippany, N.J., company could earn $7.68 per share, up from his previous estimate of $7.17 per share.

Tong said he thinks the stock could be worth $84 to $90 per share compared to his earlier estimate of $75 to $79 per share.

Watson agreed to buy its rival, Actavis, on April 25 for $5.6 billion. Actavis is based in Switzerland, and Watson said the deal will expand its business in Russia and Central and Eastern Europe. It will also make Watson the third-largest generic drug company in the world in terms of revenue: the deal is expected to close during the fourth quarter, but Watson said the companies should have combined annual sales of about $8 billion in 2012.

Date: May 24, 2012
Source: Associated Press