Teva Pharmaceutical Earnings Preview: First Quarter 2009

Teva Pharmaceuticals [[TEVA]] is scheduled to report their first quarter 2009 results before the market opens on Tuesday, May 5. Based on our analysis, we at are expecting TEVA to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $3.45 billion and EPS of $.71. This would represent a 34% increase in revenues from last year’s $2.57 billion in the same period. The current analyst consensus estimates calls for revenues of $3.42 billion and EPS of $.69.


Teva Pharmaceuticals stands to benefit from the rising cost of healthcare and the increasing demand for generic drugs. Cost-conscious consumers are becoming more aware of the savings available by choosing generic alternatives to the high-priced, name brand drugs. Insurance companies are also requiring individuals to choose generic drug options when available.


While 61% of Teva’s revenues currently come from North America, we believe there remains tremendous opportunity for sales growth in Europe and abroad. In addition, the company’s strong pipeline should provide strong organic growth in coming years.


Share Performance

Since the beginning of the year, Teva’s shares are up over 4%. In 2008, Teva’s shares fell only 8% as the stock outperformed the 34% decline in the Dow Jones index.



Shares are now trading at 10x consensus 2010 EPS estimates. This is a premium to the relative valuations of their peer group. While we like Teva’s growth prospects, we would not recommend buying at the current levels.


Recommendation: Hold with a $40 price target.


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