Teva Posts Q3 Earnings Miss, Lifts FY 2019 Outlook

Teva Posts Q3 Earnings Miss, Lifts FY 2019 Outlook
November 8, 2019


Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) reported fiscal 2019 third-quarter earnings that missed analysts’ estimates by a cent. The quarterly revenues, however, surpassed the Wall Street estimates. Furthermore, the company boosted its earnings and revenue outlook for FY 2019. In another media release, the company has stated that it has appointed Eli Kalif as CFO and Executive Vice President. Following the quarterly news release, the shares of Teva closed at $8.47, up $0.37 or 4.57% from its prior close.

Israel based Teva reported fiscal 2019 third-quarter revenues of $4.26 billion, down from $4.53 billion in the corresponding quarter last year. Analysts polled by Zacks Investment Research anticipated Teva to report revenues of $4.24 billion.

For the recent quarter, the world’s leading generic medicines manufacturer posted GAAP net loss of $314 million ($-0.29 per share) that widened from the loss of $273 million ($-0.27 per share) last year. Excluding legal settlements and loss contingencies of $468 million, amortization of purchased intangible assets worth $255 million, restructuring charges of $61 million and other expenses, non-GAAP net profit fell to $637 million, or $0.58 per share in Q3 2019, from $694 million or $0.68 a share in Q3 2018. The decline in non-GAAP earnings in the September quarter was mainly due to higher tax expenses and lower operating profit, partially negated by lower finance expenses.  Analysts had anticipated Teva to post non-GAAP earnings of $0.59 per share for the quarter.

Commenting on the results, Teva president and CEO Kåre Schultz said, “During the third quarter, we continued to make significant progress in achieving our 2019 goals. Free cash flow was especially strong in the quarter, totaling $550 million. Our North American generics business continued its steady trend, achieving sales of $914 million, supported by 39 new product launches in the first nine months of 2019, including generic EpiPen Jr. Among our branded products, Austedo continues to demonstrate consistent growth, and Ajovy maintained its US market share and is being introduced in the EU.”

Teva’s drug, Copaxone, faced heavy competition from generic drugs. Copaxone reported revenues of $271 million in the third quarter, down 41% from $463 million in the prior-year period.

Similarly, Bendeka, Treanda, and other specialty drugs also posted a decline in revenue in the US, Russia, and Japan. However, it was partially offset by an increase in revenue from Austedo, Ajovy, and Qvar in the US. Specifically, Austedo generated revenue of $105 million in the third quarter, up from $62 million in the year-ago period. Likewise, Ajovy, which was approved by the FDA in September, posted sales of $25 million.

Looking forward, Teva lifted its earnings and revenue outlook for FY 2019. The company now anticipates earnings of between $2.30 and $2.50 per share on revenues in the range of $17.20 billion to $17.40 billion.  On average, analysts surveyed by Thomson Reuters anticipate the company to post earnings of $2.38 per share on revenues of $17.18 billion.

Cash flow from operations declined to $325 million in Q3 2019, from $421 million in Q3 2018. Free cash flow dropped to $551 million in the recent quarter, compared with $704 million last year. The decline in the free cash flow was primarily due to lower revenues and higher capital investments. By the end of September quarter, the company’s debt stood at $26.94 billion, down from $28.73 billion in the June quarter. The decrease in debt was mainly due to repayment of $1.556 billion worth senior notes.

Teva pointed out that it is on track to reach its two-year restructuring target of $3 billion reduction in capital expenditures. Regarding debt reduction, Schultz said, “We remain on track to achieve our two-year restructuring target of a $3 billion spend base reduction. Looking ahead, we are committed to driving long-term shareholder value by maximizing profits from existing core businesses, increasing sales of new brands and products, executing our biosimilar/biologics strategy, delivering manufacturing efficiencies, and generating strong free cash flow for debt repayment.”

Eli Kalif, who has been named as the new CFO, will take charge on December 22nd, 2019. Kalif was previously working as Senior Vice President, Finance at Flex Ltd. (FLEX). Kalif will perform his duties from the company’s global headquarters in Israel.

Regarding Kalif’s appointment, Teva’s CEO said: “Eli brings to Teva more than 20 years of leadership roles with a proven track record in complex financial organizations, where he was responsible for leading global teams supporting multi-billion-dollar operations within a dynamic market environment.”

The revenue beat and upwardly revised FY 2019 outlook are anticipated to keep the stock bullish in the short-term.

The price chart provided below indicates that the stock is rising after consolidating at 8.30 levels. The next resistance is anticipated near 14 levels. The stochastic oscillator is also in the bullish region. Therefore, we are expecting the stock to move up in the short-term.

teva - technical analysis - 8th Nov 2019

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Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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