Jazz Pharmaceuticals (NASDAQ: JAZZ) has finally caught some positive momentum, gaining about 10% during the week.

CEO Bruce Cozadd gave a strong presentation at the annual J.P. Morgan Healthcare Conference, which helped to awaken buying interest in the stock.

Good Results Confirmed

Jazz confirmed its 2017 revenue guidance, expected to be around $1.62 billion, marking a 9% increase over last year. While the sales volume growth of its top drug Xyrem was about flat in 2017, Jazz expects growth to reaccelerate to low- to mid-single digit this year. Assuming some price increase, overall Xyrem sales growth thus could be in the teens in 2018.

Jazz noted that the launch for Vyxeos continues to go well, and may beat the high end of its 2017 sales guidance of $30 million.

Jazz has also filed an application with the FDA to market JPZ-110 for the treatment of excessive sleepiness in adult patients with narcolepsy or obstructive sleep apnea. FDA has designated JPZ-110 as an orphan drug. Approval is expected late in 2018, and the sales launch will likely occur in a little over one year from now.

The company estimates JPZ-110’s target patient population size in the U.S. and the E.U. to be roughly 340,000. Doctors tend to under-diagnose narcolepsy, so Jazz has an opportunity to raise awareness and diagnosis, which would boost sales of JPZ-110 (assuming FDA approval).

Strong Pipeline Activity

JPZ-110 is also currently in Phase 2 studies as a potential treatment for excessive sleepiness in Parkinson’s Disease patients. Data readout is expected by the first half of 2019. There are currently no drugs to treat this common symptom of Parkinson’s. If the drug gains eventual FDA approval for this specific condition, Jazz projects the eligible patient population to be approximately 140,000.

By the second half of this year, Jazz will apply for approval of JZP-507, a new version of Xyrem with 50% less sodium. It will start a new phase-III study for JZP-258 for idiopathic hypersomnia. This is on top of another Phase-3 JZP-258 study for narcolepsy. Additionally, Jazz will have new Phase-2 study for new indications for Vyxeos and Defitelio.

So pipeline activity is increasing and chances are good that Jazz will be able to continue find additional revenue contribution from other products to reduce its reliance on Xyrem.

On the tax front, Jazz noted that under the new tax law, its effective tax rate could fall into the mid-single-digit range for 2018 and the foreseeable future. This would provide an extra boost to earnings.

Compelling Valuation

Earnings per share are expected to grow in double digits annually, which makes the current valuation of only 12-times projected forward twelve-month forward earnings look even more compelling. JAZZ combines a solid earnings growth rate with a cheap valuation.

JAZZ had a lackluster second half of 2017 due to low investor interest, but a good investor presentation has rekindled some enthusiasm for this under-valued stock. We bump our suggested buy-up-to price to $155. We believe Jazz will be able to reassure investors that growth is on track and the share price will climb well beyond $155.

AIR Takes Off

AAR Corporation (NYSE: AIR) also popped today in reaction to its strong Investor Day presentation. The stock also received an upgrade from Credit Suisse.

We are reviewing the presentation material, and what we see so far looks good. The company offered a fiscal-year 2019 (June 2018 to May 2019) guidance of sales in the range of $2.1 billion to $2.2 billion and earnings per share in the range of $2.50 to $2.80. Even after today’s jump, at the mid-point of the earnings guidance, AIR is still trading at just 16-times projected FY2019 EPS. We will have more details on the presentation in an upcoming update.

A few weeks ago, we noted we may lift our suggested buy-up-to price for AIR even after the stock dipped. We do it today, to $45.