NEW YORK (MarketWatch) � A trio of analysts on Wednesday upgraded Johnson &Johnson shares and cited enthusiasm for quicker than expected profits from the healthcare firm�s just-approved buyout of Swiss device maker Synthes.
Johnson & Johnson JNJ �shares rose 1.5% in Wednesday trading, following on their after market gains Tuesday. On Tuesday the company revealed that it received U.S. regulatory clearance to buy Synthes. It expects to close the $19.7 billion transaction by June 14.
More importantly, the personal care products maker said it expects the Synthes cash-and-stock deal -- the largest in the company�s history -- to boost 2012 earnings by 3 to 5 cents a share, and 2013 earnings by an estimated 10 cents to 15 cents a share. When it was first announced, J&J originally forecast that the acquisition will hurt earnings by 22 cents a share, based on 2010 financial information.
J.P. Morgan upgraded the shares to overweight from neutral and lifted its price to $74 from $69, citing optimism over the company�s pipeline of generic drug brands and a new CEO, Alex Gorsky. The investment bank recently met with Gorsky, who has been in the role for six weeks, and said the new chief was �passionate about J&J and committed to better quality�.
Raymond James analysts upgraded the Johnson & Johnson to outperform from market perform, and said that it expects the Synthes acquisition to generate high single-digit revenue and EPS growth in 2013. It set a price target of $72.
Meanwhile, Jefferies said in a research note that �the improved economics of the transaction and demand for the shares likely to be caused by the accelerated share repurchase should allow sentiment to turn the corner�. It upgraded the company to buy from hold, and revised its price target to $72 from $68.
All three firms agree that J&J shares have underperformed in recent years faced with product recalls and increased industry competition.
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