Is downgrade cycle levelling off a signal to buy AstraZeneca stock?

Anglo-Swedish drug major AstraZeneca (LSE: AZN) shares have been weak, as defensive stocks retrench from mid-year highs, say analysts at Panmure Gordon, who note that “this is partly sector wide, but in AstraZeneca’s case we have seen a sequence of market downgrades dominate the year to date.”

They say in a client note this morning (September 12): “As we compare our forecasts with consensus circulated by the company yesterday, we acknowledge our numbers were probably too bullish. Therefore we make changes which result in EPS downgrades of 0.5%, 6.8% and 16.2% to FY2013, FY2014 and FY2015 forecasts respectively. We remain on Hold recommendation.”

• The main changes were downgrades to the firm’s cholesterol lowerer Crestor (rosuvastatin) forecast by around $800-1,000 million per annum, which the analysts now forecast will generate revenues of $5,381million (versus $5,389 million), $5,025 million (vs $5,215 million) and $4,693 million (vs $3,892 million) in FY2014, FY2015 and FY2016 respectively. They have also adjusted their headline forecast R&D investment which they now expect will grow by 7-8% per annum over the next three years compared to 2-3% growth previously. This is as direct result of all the BD&L activity the company has undertaken over the past six-nine months.