The Dow is sitting at a new highand you could argue that the move in the pharmaceuticals sector today is largely market related with Dow components Merck , Pfizer and Johnson & Johnson all trading up. As I write this the biggest dollar gainer in the group is Eli Lilly . But the largest percentage gainer is Schering-Plough . I don't see any news on the company, but Deutsche Bank analyst Barbara Ryan did come out with a bullish research note on SGP which could be driving some of the move we're seeing in that stock and the whole group today.
She's telling clients that "the weak dollar could add 3-5% to revenue growth" across the sector. But she singles out SGP for the biggest potential upside. "While each of the companies will benefit, the largest beneficiary in (the third quarter) is likely to be SGP, as it has the highest concentration of (outside U.S.) revenues…."
Ryan also mentions Wyeth and MRK as among the top tier of weak-dollar beneficiaries. But, again, she believes the currency situation could give all of her companies a lift writing (the boldface is her emphasis), "the consistent benefits from favorable exchange (weak dollar) over the past 4 quarters have accelerated, and are likely to be an important tailwind to the group's fundamental performance in the back half of the year."
Ryan goes on to point out that the American drugmakers get 40%-60% of their profits from outside the U.S. and that a large chunk of that business is done in Europe and Japan where the dollar is weakest. Deutsche owns at least 1% of MRK, SGP and WYE and wants to bank SGP and WYE.
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