Citi and Merrill Lynch both cut their target prices for Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), although they reiterated their "Buy" recommendations, after the company yesterday published its financial report for the fourth quarter and full year of 2010, and released lower than expected guidance for 2011.
Citi cut its target price to $67 from $72. Analyst John Boris noted Teva's increasing reliance on branded products, which sets it apart from its generic peers. "We expect Teva to have one of the group's highest long-term revenue and earnings per share growth rates. Teva is becoming increasingly diversified as a still larger proportion of its top line is derived from its branded business, as opposed to the traditional generic business. This strategy set Teva aside from its peers, since it contributes to an expanding net income margin and affords Teva a better shield against the generic price erosion in the US. Teva is also the only company in the peer group that pays a dividend," he writes.
Merrill Lynch analysts Gregg Gilbert, Haim Israel, and Simant Kulkarni cut their target price for Teva to $65 from $68. They base the lower target on lower earnings per share estimates of $5 for 2011 (down from $5.43), and $5.86 for 2012 (down from $6.23).
The analysts note, "Teva attributed its fourth quarter weakness to the inherent variability in generic launch timing (in part due to issues at the Irvine injectables plant). In 2011, Teva estimates about 20 of its 40 potential US launches could make it to the market." They add, "We are tweaking our price objective down to $65 (vs. $68), which continues to assume that the stock can trade at roughly 11 times our new lower 2012 estimated EPS. But we are maintaining our Buy rating, as we continue to believe that poor recent stock performance and negative investor sentiment create a particularly interesting risk/reward opportunity."
IBI Investment House analyst Natali Gotlieb reiterates her "Buy" recommendation and keeps her $73 target price for Teva. "Despite weakness due to exchange rates, Teva's business remains strong, and raised prices for Copaxone in the first quarter should result in strong revenue in the next quarter, too. We believe that the share price provides a good opportunity to become exposed to the company."
Teva's share fell 5.4% on Nasdaq yesterday to $52.02, giving a market cap of $48.69 billion, and fell a further 0.7% by midday on the TASE today to NIS 190.80.
Published by Globes [online], Israel business news - www.globes-online.com - on February 9, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011