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Teva (TEVA): Can it Keep the Earnings Streak Alive in Q3?

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Teva Pharmaceutical Industries Ltd. (TEVA - Free Report) will be reporting third-quarter 2016 earnings on Nov 15, before market open. Last quarter, the company delivered a positive earnings surprise of 5.93%.

The generic drug maker has been consistently beating earnings expectations. The company’s earnings surpassed expectations in three of the last four quarters, with an average positive surprise of 3.75%.

TEVA PHARM ADR Price and EPS Surprise

 

TEVA PHARM ADR Price and EPS Surprise | TEVA PHARM ADR Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

Teva’s generic segment could continue seeing weakness. In the first and second quarters, generic segment revenues declined 17% and 7%, respectively. Revenues from U.S. generics declined more than 30% in both the quarters reflecting loss of exclusivity for the generic versions of Nexium and Pulmicort.

In the third quarter, important launches were that of generic versions of Cubicin and Gleevec in the U.S. which can provide some sales support.

The EU generics segment will remain under pressure with sales being affected by macro-economic conditions and healthcare reforms.

However, Teva’s position in the generics market should strengthen with the completion of the acquisition of Allergan plc’s (AGN - Free Report) generics segment -- Actavis Generics in August and its U.S. generic distribution business Anda, Inc. in October.

With the closing of this deal, Teva now has commercial presence in 80 markets, including a top-three leadership position in more than 40 markets and global leadership in all key global markets. The combined pending ANDAs are about 338 including 115 FTFs and Teva now has a significantly improved platform in the EU and ROW. Meanwhile, Allergan’s Anda business will be a natural fit in Teva's business model.

Teva expects to achieve $1.4 billion in operational and tax synergies by the end of 2019 through this deal which is expected to boost 2017 EPS by about 17% and 2019 EPS by 19%.

Meanwhile, in the branded segment, specialty products and Copaxane should continue to do well.

Investors will remain focused on the Copaxone franchise’s performance considering the 20 mg version of the multiple sclerosis treatment that is facing generic competition in the form of Glatopa. Investors will also be interested in the performance of newly launched products like Bendeka and Cinqair.

Teva continues to focus on its cost reduction program which should pull up profits.

Earnings Whispers

Our proven model does not conclusively show that Teva is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is -0.79% as the Most Accurate estimate stands at $1.26 per share while the Zacks Consensus Estimate is pegged higher at $1.27 per share.

Zacks Rank:T eva’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

AveXis, Inc. (AVXS - Free Report) is scheduled to release results on Nov 10. The company has an Earnings ESP of 11.43% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Global Blood Therapeutics, Inc. (GBT - Free Report) with an Earnings ESP of +16.95% and a Zacks Rank #2. The company is expected to release results on Nov 10.

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