Teva Pharmaceutical Industries Ltd (ADR) (TEVA) Stock Still Has a Chance

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The year for Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) has certainly been awful, with the shares off about 14%. Yet last year was even worse: TEVA stock plunged from $56.44 to $31.15.

Teva Pharmaceutical Industries Ltd (ADR) (TEVA) Stock Still Has a Chance

But this week, we should get a better idea about the situation. Before the markets open tomorrow, Teva Pharmaceuticals will report its first-quarter results.

The consensus estimate is that revenues will come in at $5.69 billion, up from $5 billion on a year-over-year basis. The main reason for the 13.8% jump is likely from the impact of the mega acquisition of Actavis Generics business.

As for the earnings on TEVA stock, the forecast is for $1.17 per share, compared to last year’s $1.36.

Now there seems to be a good chance for a beat — on both the top and bottom lines. Keep in mind that Teva Pharmaceuticals tends to be conservative with its guidance. For example, during the previous earnings report, the company was able to exceed expectations.

And besides, there has been mostly negative news surrounding TEVA stock — so the bar has been set fairly low. Oh, and it also helps that other pharma operators have shown improvement, such as Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Allergan plc Ordinary Shares (NYSE:AGN).

Main Factors to Consider With Teva Pharmaceuticals

OK, then what will be the main factors that investors in Teva Pharmaceuticals will look for in the upcoming earnings report? Well, let’s take a look:

Balance Sheet: Because of the aggressive M&A strategy, TEVA stock has a massive debt load behind it, at about $39.38 billion. There is also only about $2 billion in the bank.

Keep in mind that the company has indicated it wants to find ways to cut this back. So investors in TEVA stock will want to get more of a detailed plan, such as with any asset sales and cost-cutting programs.

Status of Copaxone: This is Teva Pharmaceuticals’ biggest selling drug, which is a treatment for multiple sclerosis. It accounts for nearly a fifth of the overall revenues and about 35% of the profits.

Unfortunately, the drug has seen quite a few setbacks. First of all, the U.S. government has denied various patents on Copaxone. Next, Novartis AG (ADR) (NYSE:NVS) and Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) have an alternative treatment.

So if there is ongoing deterioration, it could mean further pressure on TEVA stock.

Pipeline: There has been some recent good news on this front. That is, the company got approval for Austedo (SD-809), which is a treatment for a form of Huntington’s Disease. While it is probably not going to be a blockbuster, the drug will certainly provide some lift to revenues. What’s more, there is an offshoot of this drug — for tardive dyskinesia — that could provide further momentum if it is approved.

Leadership: Back in early February, Teva Pharmaceuticals CEO Erez Vigodman resigned his post over allegations of a bribery investigation. Granted, the company has a history of turnover in the executive suite — there have been five CEOs during the past 15 years!

But investors in TEVA stock have legitimate concerns about the latest departure. What’s the status of the investigation? And might there be issues with acquisition of the Actavis Generics business?

Bottom Line On TEVA Stock

Given all the drama and problems, it is not easy to be bullish on Teva Pharmaceuticals. But sometimes this is when a contrarian play makes sense.

In the case of TEVA stock, the valuation is attractive, with the forward price-to-earnings ratio at a mere 6.5X. The dividend is also at 4.4% — and yes, the cash flows are more than sufficient to make the payout.

And finally, much of the bad news has been made available and has been baked into the shares. So even if there is a decent beat on estimates — which seems reasonable — there could be a move on the upside with TEVA stock.

Tom Taulli runs the InvestorPlace blog IPO Playbook as well as OptionExercise.com, which provides interactive tools & services for employee stock options of pre/post IPO companies. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/teva-pharmaceutical-industries-ltd-adr-teva-stock-chance/.

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