Sanofi-Aventis SA (SNY), the large French drug company, has seen its stock zigzag in 2009 as the big pharma sector is experiencing mergers and acquisitions. SNY is a good value play, trading at only 6.8x forward earnings.

Company Description

Sanofi-Aventis is the third largest pharmaceutical company in the world based on revenue. The company has two major business segments: pharmaceuticals and human vaccines. It focuses on treatments in the cardiovascular, oncology and central nervous system areas.

Revenue Rises 3.6% in the Fourth Quarter

On Feb 11, the French company reported earnings for the fourth-quarter 2008 which saw revenue grow 3% compared to the year ago period. Sales for the pharmaceuticals segment grew 3.1% year over year with human vaccines rising 8.9%.

Adjusted net income, excluding items, climbed 16.8% to 1.25 euro compared to 1.07 euro. In US currency, the company reported 82 cents a share which was inline with analysts’ estimates.

2009 Guidance

Sanofi expects growth of at least 7% in 2009 at constant exchange rates, barring any major adverse events such as the launch of a generic of Lovenox in the United States.

2009 Consensus Estimates Rise

Covering analysts’ recommendations have been mixed in recent weeks. For the full-year 2009, estimates have risen to $3.82 from $3.72 in the last 90 days. However, in just the last week, one analyst has raised while another has lowered estimates.

Acquisitions to Occur in 2009?

According to the Financial Times, last month Sanofi-Aventis approached big shareholders of Belgium’s Solvay Incorporatedluding Solvac, the family-owned holding company that owns a large percentage of Solvay, about acquiring the company’s pharmaceuticals division, thought to be valued at about $6.6 billion.

In February, in their latest research report, Zacks Equity Analysts Brian Marckx and Jason Napodano outlined the possibility of a major acquisition for the company in 2009. They have a “hold” on the stock with a price target of $36 a share.

Value Fundamentals

Sanofi-Aventis is a Zacks #1 Rank (strong buy) stock. It is currently trading with a P/E of 6.77 and a price-to-book ratio of only 1.11. The company has a solid 5-year return on equity of 14.84%.

As an added bonus, SNY pays a dividend with a current yield of 5.80%.

Zacks Investment Research
View original at: Zacks.com News Feed

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