Teva Stock Gets a Thumbs Up from Merrill Lynch Ahead of Earnings


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)

 

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