Teva Seeks to Break Its Streak of Post-Earnings Stock Losses

(Bloomberg) -- Earnings reports haven’t been kind to shares of Teva Pharmaceutical Industries lately.

Its American depositary receipts have dropped an average of 14 percent on the day immediately following the generic drugmaker’s past five releases. Whether another down day awaits after the third-quarter report tomorrow depends on what progress investors see in Chief Executive Officer Kare Schultz’s turnaround plan during his first full year on the job. A lot of pessimism may already be priced in after the stock posted its worst week of the year at the end of September when analysts cut their forecasts.

Teva’s target for $4 billion in U.S. generic sales this year is “clearly at risk,” Bernstein analyst Ronny Gal said in an interview, but he still expects the company to beat the consensus estimate on earnings as margins improve. Gal also says sales of Teva’s top-selling multiple sclerosis drug, Copaxone, may not be dropping as fast as some expect.

Analysts from Morgan Stanley and Wells Fargo also have concerns about a weak market for generics. If the company does beat estimates, but does so because of sales of Copaxone, cost-cutting or other short-term factors, the shares could see a down day anyway, warned Wells Fargo’s David Maris.

Investors will also be listening for remarks on its migraine medicine Ajovy after a key pharmacy benefit manager snubbed the treatment, instead giving drugs from Eli Lilly & Co. and Amgen Inc. preferred status.

Austedo, another newer branded drug for Teva, may surprise to the upside, Bloomberg Intelligence’s Curt Wanek wrote. Wanek expects the drugmaker to beat on earnings but miss on sales with Copaxone the “biggest swing factor.”

Just the numbers

  • 3Q adjusted EPS estimate 54c (range 44c to 65c) (Bloomberg data)
  • 3Q Ebitda $1.10 billion (range $1.04 billion to $1.25 billion) (BD)
  • 3Q revenue estimate $4.51 billion (range $4.26 billion to $4.75 billion) (BD)
    • 3Q Copaxone revenue estimate $496.5 million (BD)
    • 3Q Austedo revenue estimate $51.9 million (BD)
  • 2018 revenue estimate $18.84 billion (range $18.60 billion to $19.14 billion) (BD), company forecast $18.5 billion-$19 billion
  • 2018 adjusted EPS estimate $2.77 (range $2.67 to $2.93) (BD), company forecast $2.55-$2.80

Data

  • 5 buys, 18 holds, 4 sells; average price target $23, implies 14 percent upside from current trading
  • Teva shares are up 46% in the past 12 months; they hit an 18-year low in Nov. 2017

Timing

  • Earnings release expected 1pm (Tel Aviv time) Nov. 1
  • Call 2pm (Tel Aviv time), +44 (0) 2071 928000 password: 7193665
  • Conference call website

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