The second-quarter financials due to be released by Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) today are expected to show an improvement over the previous quarter, and to look good on the whole. Nevertheless, it is not clear whether they will please investors, or whether the latter will continue to focus on the medium term, which is largely shrouded in fog. These are the main conclusions of the analysts covering Teva in advance of tomorrow's results.
Steven Tepper of Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) rates Teva "Buy", with a price target of $55, which compares with a closing price of $40.89 in New York yesterday. In his view, Teva will post a substantial rise in sales in comparison with the previous and corresponding quarters, mainly because of the consolidation of Cephalon (in the fourth quarter of 2011), alongside good generic launches in the first quarter of 2012.
On the other hand, Tepper sees weakness in the European generic market, a continuation of the trend that hurt Teva's financials in the previous quarter. In Japan, according to Tepper, Teva can be expected to record growth, because of the merging of Teva's three Japanese activities into one company.
Revenue from branded drugs, headed by Copaxone, will generally grow, because of the merger with Cephalon. Copaxone sales specifically are likely to be hit because of the change in the relationship with the distributors, but a rise in sales following the ending of the distribution agreement in Europe with Sanofi will cover some of the loss. Tepper says that earnings per share will be positively impacted by the share buyback that Teva continued to carry out in the reporting period.
Levin will unveil his strategy
Among other things, Tepper's recommendation anticipates the unveiling of the strategy that newly appointed CEO Jeremy Levin plans for the company, an event that is supposed to take place within the next month or two. The expectation of this event represented an element of uncertainty concerning the company, and the share price may rise if the plan delivers the goods in investors' eyes.
Uri Hershkovitz of the Sphera Global Healthcare Fund points out that, since Levin recently published updated guidance for annual revenue, no surprises should be expected. Gilad Alper of Excellence Nessuah Investment House Ltd. also says that he expects a positive quarter since "Teva's traditional growth engines are still functioning." The new generic launches will allow growth in this area, despite general weakness in the European and American generic markets. Alper adds that another excellent year is expected for Copaxone, as Teva has managed to protect its patent until 2014 at least. Alper rates Teva "Buy", with a $45 price target.
Sabina Podval of Leader Capital Markets does not expect any surprises in the current quarter either, and rates Teva "Buy", with a price target of $49.
The analysts' consensus estimate is for earnings per share of $1.28 and revenue of $5.08 billion in the second quarter. This compares with revenue of $4.2 billion and earnings per share of $1.01 in the corresponding quarter, before the consolidation of Cephalon.
Published by Globes [online], Israel business news - www.globes-online.com - on August 1, 2012
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