Despite posting better than anticipated fiscal 2016 third-quarter earnings that surpassed the analyst’s estimates, the stock of Teva Pharmaceutical Industries Ltd (NYSE: TEVA) was hammered by the punters. The market participants attributed the cut in fiscal 2016 outlook to the decline in the stock’s price. However, considering the transition undergone by the company, we believe that the stock would begin to rise in the near future. We hereby present our argument in favor of the bullish view.
The Israel-based company reported third-quarter revenues of $5.56 billion, an increase of $740 million from $4.823 billion in the third quarter of 2015. The Q3 GAAP net income more than tripled to $348 million or $0.35 per share, from $103 million or $0.12 per share in the corresponding quarter last year. Excluding charges, the non-GAAP net income for the reported quarter was $1.364 billion or $1.31 per share, compared with non-GAAP net income of $1.165 billion or $1.35 per share in the corresponding quarter of 2015. The reported third-quarter earnings topped the Wall Street estimates of $1.28 per share. However, the revenues missed the Zacks analysts’ estimates of $5.73 billion.
During the third quarter, the Generic medicines segment reported a 50% increase in profit to $867 million. The Q3 2016 cash flow from operations was $1.5 billion, up 34% compared to the Q3 2015.
The company trimmed its FY16 revenue and earnings outlook. Teva now anticipates revenues in the range of $21.6 billion to $21.9 billion. This compares with the prior guidance of between $22 billion and $22.5 billion. The new revenue guidance is still higher than the Zacks estimates of $22.31 billion.
Teva now expects earnings in the range of $5.10 per share to $5.20 per share. The prior earnings outlook was $5.20 to $5.40 per share. It can be noted that the lower end of the company’s EPS view is higher than the Zacks consensus estimate of $5.17 per share.
For the fourth-quarter, Teva expects revenues in the range of $6.20 to $6.50 billion. The earnings are anticipated to be between $1.34 and $1.44 per share. The Wall Street analysts anticipate earnings of $1.41 per share on revenues of $6.58 billion.
The recent fall in the share price has compensated for the fiscal 2016 earnings cut. So, the stock is not expected to fall further.
Technically, the stock has found support at 37.50 levels. The stock is also in an extremely oversold condition as revealed by the stochastic oscillator. The MACD indicator has started making a U-turn in the negative zone. This indicates that the downtrend is coming to an end.
So, a binary trader can pick up a high (or above) contract from a suitable binary broker. The entry should be done when the stock trades near 38 levels. The option should remain valid for a period of one week.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
