The turnaround at Teva Pharmaceutical Industries (TEVA) remains on schedule.
Investors appear satisfied that CEO Kare Schultz is making enough progress in battling several familiar obstacles for Teva: too much debt, new competition for a key branded multiple-sclerosis drug and falling generic drug prices in the U.S. Teva’s restructuring program won’t be complete until the end of 2019, yet the stock rose nearly 30% so far this year.
As Teve gears up to deliver its fourth-quarter results come February 13th , investors are content to see a bullish vote backing the Israeli generics giant from Merrill Lynch analyst Jason Gerberry. Gerberry reiterates a Buy rating on TEVA stock, while raising his price target to $24 (from $20), which implies a 20% upside from current levels. (To watch Gerberry’s track record, click here)
Gerberry opined, “We forecast FY18 total TEVA sales of $18.8bn, -16% Y/Y, EBIT $4.6bn (-24% Y/Y) and EPS $2.91, -27%, capping off the mid-innings of the company’s transition through major patent LOE period and challenging US generic pricing cycle. Our ests are relatively in-line with Bloomberg consensus on revenue and slightly lower on EBIT and EPS, possibly due to phasing of TEVA’s cost restructuring. Y/Y topline pressure is expected across portfolio but Copaxone LOE is the main headwind.”
“We expect TEVA to guide to ~-6% revenue decline inclusive of a -5% headwind from global Copaxone generics, -3% from US generic base erosion and -1% headwind from Fx. Key offsets: +$600m in US generic new launches (risk adjusted) and +250m from new spec brands. Our forecast of $17.7bn is slightly below cons $17.9bn. US Copaxone scripts have held up (-6% Q/Q), we assume -51% Y/Y erosion on increased competition. We forecast ~$1.2bn in cost reductions from restructuring neutralizing the impact on op margins. Our EPS est. of $2.83 (-4% Y/Y; prev $2.76) includes +6% in avg share count,” the analyst continued.
But the Street is sticking with its ‘hold’ consensus rating. Out of 9 analysts polled in the last 3 months, 3 rate Buy on Teva stock, 5 maintain Hold, while only 1 issues Sell. The 12-month average price target stands at $20.73 marking about 4% upside from where the stock is currently trading. (See TEVA’s price targets and analyst ratings on TipRanks)
