Ebb & Flow

Investors typically move into defensive stocks such as healthcare when the general economy gets glum, on the presumption that disease and malady know no recession. But with the bear market running well into its second year, an even better place to stick one's money might be in companies developing drugs for depression. Along those lines, Forest (FRX) has proved itself to be recession-proof. The company last Tuesday blew through its previously bumped up fiscal second quarter EPS estimates, thanks to strong sales of antidepressants Celexa and Lexapro.

FRX found it had much company in the "upside surprise" group, as it was one of six pharma and biotech companies that beat the Street last week(see "Good Batting Average").The solid numbers helped the sectors outperform other key indexes in a rebound week for the entire market. Both the BioCentury 100 and the AMEX Pharma Index advanced 7% on the week, besting the 6% moves for the NASDAQ Composite, the Dow Jones Industrials and the S&P 500.

FRX posted EPS of $0.77, $0.04 above the recently ratcheted up Street consensus of $0.73, and 79% above the $0.43 EPS posted in the second quarter of 2001. On Sept. 30, FRX said second quarter EPS would be at least 30% higher than the Street's estimate, which then stood at $0.57. Sales increased 41% quarter-over-quarter to $531.6 million from $376.3 million. The stock hit a new 52-week high on Thursday at $100.55, and closed Friday at $99.47, up $7.24 on the week. FRX is up $17.52 (21%) on the year. Its market cap now stands at $17.9 billion, right in the "Sweet Sport" for growth specialty and biotech companies (see BioCentury, Sept. 3, 2002).

Other stocks moved on earnings guidance. Chiron (CHIR) jumped $3.96 (10%) to $42.51 on the week, including a $1.64 move to $40.19 on 5 million shares on Monday, when it raised its third quarter EPS

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