You know there was some bad news with a company’s quarterly update when the stock tanks after the results are announced. That’s what happened this morning with Teva Pharmaceutical Industries (TEVA). The generic drug maker’s shares fell nearly 8% after reporting a 4Q18 miss and lower than expected 2019 financial guidance.
Specifically, Teva reported 4Q:18 revenues of $4.56 billion, adj. EBITDA of $1.09 billion, and non-GAAP EPS of $0.53 as compared to consensus estimates of $4.53B, $1.15B and $0.55, respectively. Looking ahead, Teva issued 2019 guidance of $17.0-$17.4B in revenue ($17.9B consensus), adj. EBITDA of $4.4B-$4.8B ($5.27B consensus), and non-GAAP EPS of $2.20-$2.50 ($2.82 consensus).
Mizuho analyst Irina Rivkind Koffler commented, “We believe the buy-side expected beatable conservative guidance, but was looking for an EBITDA north of $5.0B, and we expect weakness in the stock as a result. Mgmt. noted that 2019 would be a trough year for the company. There are some forward-looking encouraging signals with respect to the growth of new branded products like Austedo (projecting $350M in 2019 vs. $358M consensus) and Ajovy (projecting $150M in 2019 vs. $81M consensus), and better stability in N. American generics, offset by greater weakness in international markets, which may be a more forgivable sin, and was also reported by competitors.”
Koffler reiterates a Buy rating on Teva stock with a price target of $25, which represents a potential upside of 43% from where the stock is currently trading. (To watch Koffler’s track record, click here)
Chen noted, “Sentiment going into the year was positive for TEVA, and investors we spoke with were anticipating a better year for new launches and pricing. Therefore, we think there could be some disappointment with the announcement. That said, brands such as Ajovy and Austedo continue to grow and it was not clear the impact from FX and how much in new launches was incorporated into TEVA’s 2019 guide. There was also not a lot of color on international sales.”
All in all, the word on the Street points to a sidelined majority on Teva. In the last three months, the drug maker has landed three ‘buy’ ratings vs. six ‘hold,’ and one ‘sell’ ratings. That said, the consensus average price target points to $21.26, or nearly 18% upside potential for the stock. This suggests that by consensus expectations, for now, the bulls win. (See TEVA’s price targets and analyst ratings on TipRanks)