'Poor Quality' Amgen Earnings Beat Doesn't Impress These Two Wall Street Analysts - Amgen (NASDAQ:AMGN)

Amgen, Inc. AMGN Tuesday earnings report was of "poor-quality" and the company doesn't have any near-term catalysts to support the stock, analysts at BMO Capital Markets said.

Analyst M. Ian Somaiya downgraded Amgen's stock rating from Outperform to Market Perform left the firm's $199 price target unchanged on Tuesday.

Amgen's Enbrel saw sales of $1.466 billion in the quarter, which topped Somaiya's estimates of $1.416 billion. The upside was driven mostly by excess inventory, but this trend will normalize in the back half of the year, the analyst said.

Repatha gained market share in the quarter but a sales inflection point is dependent on a label update and American College of Cardiology treatment guidelines in late 2017, Somaiya said.

An update to the ACC treatment guidelines is expected in the third quarter of this year and revisions to the official guideline will come sometime late next year, the analyst said. While this decision serves as a template for official guideline changes, the analyst believes the guideline revisions "will be the key gating factor."

Finally, Amgen's Neulasta showed signs of facing headwinds in the quarter as sales were down from $1.210 billion in the prior quarter to $1.087 billion in the most recent quarter. Neulasta sales could even decline some more as competitors will be entering the market, Somaiya said.

UBS Agrees With Low Quality

UBS' Carter Gould maintained a Neutral on Amgen's stock and raised the price target from $175 to $180, noting that the "low quality" beat in the quarter, especially relative to Enbrel.

"The Enbrel beat (+$124M) was relatively low quality driven primarily by inventory and price," Gould said in a Wednesday note. "That dynamic, coupled with broader shifts in utilization criteria for Repatha, likely weighted to after shifts in the guidelines/pathways and an updated label, likely played a role in the modest 2017 guidance raises."

Amgen only "minimally" raised its top-line guidance at the midpoint, but the company simultaneously lowered its top-end guidance, Gould said.

Given the stock's 17 percent gain over the past two months alone, the stock is expected to experience near-term weakness.

UBS projects that Amgen will see total Enbrel sales of $5.3 billion in 2017 which marks an increase from a prior estimate of $5 billion, the analyst said. The company's expenses are expected to increase by $154 million to $11.1 billion, and the net impact is a 6-cent per share increase to the analyst's EPS estimate, which is now $12.44.

Finally, a net present value sum of the parts valuation model yields a $180 price target as follows:

Enbrel/Total Inflammation: $25.63 per share.
Total nephrology: $25.11 per share.
Total oncology: $37.27 per share.
Total bone health: $25.84 per share.
Repatha/total CV: $15.01 per share.
Erenumab/total neuro: $4.31 per share.
Total biosimilar: $24.00 per share.
Other commercial state products: $3 per share.
Other revenues: $10 per share.
Pipeline: $3 per share.
Net cash: $6 per share.

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