Insights

Teva’s Q1 Results: Is the Stock About to Crash?

There are numerous companies in the healthcare sector that have been outstanding performers on the stock exchange lately. Alas, Teva Pharmaceutical Industries (NYSE: TEVA) isn’t one of them. 
On Tuesday, May 3, the generic-drugs specialist published first-quarter results that showed notable declines in some of its fundamentals. Perhaps this marks the start of an even tougher bear market for the stock.
Meeting expectations
For the quarter, Teva’s revenue fell by 8% on a year-over-year basis to $3.66 billion. The company’s non-GAAP (adjusted) net profit also saw a slide, declining at a 13% clip to land at $609 million, or $0.55 per share.
Give some credit to the analysts following Teva stock — they were basically on the money with this one. Their collective estimate for revenue was very close to reality at $3.74 billion, while they hit a bullseye with a $0.55 per-share projection for adjusted, per-share net profit.
Image source: Getty Images.

During the pandemic, many patients chose to delay medical visits and procedures. With minimal to no restrictions in place, medical facilities seemed to continue as usual. However, the Israel-based pharmaceutical company didn’t benefit greatly from a global return to the doctor’s office. Its classic generics business saw a 15% drop in sales during the quarter in its top market, North America. Meanwhile, in both the Europe and the “international” markets (i.e., the world outside of those two continents), sales of these medicines were essentially flat.
That said, Teva notched several successes with other products. In the earnings release, the company quoted CEO Kare Schultz as saying that this year “is off to a solid start with the successful launch of a first generic version of Revlimid in the United States, and gains in market share for Ajovy both in the U.S. and in Europe, where it has solidified its leadership position as the second leading brand.”
Revlimid, developed by current Bristol Myers Squibb subsidiary Celgene, is a drug that treats multiple myeloma, mantle cell lymphoma, and some myelodysplastic syndromes (MDS). Ajovy is an injectable that targets migraines in adults. U.S. sales of Teva’s version of Revlimid only kicked off in March, while at $36 million, Ajovy comprises only a fraction of the company’s revenue.
Sluggish growth at best
Although Schultz put a positive spin on Teva’s first quarter, a trimming and narrowing of top-line guidance indicates the company is less confident about the future.
For the entirety of 2022, it now expects to post revenue of $15.4 billion to $16 billion, a shift from the company’s guidance earlier this year of $15.6 billion to $16.2 billion. The new forecast shows only a potential slight improvement, at best, over the 2021 result of $15.9 billion.
As for profitability, earnings before interest, taxes, depreciation, and amortization (EBITDA) should be $4.7 billion to $5 billion. While that guidance remains unchanged, it would represent maximally only a bump in growth (2021 EBITDA was $4.9 billion).
Investors are willing to accept that generics-heavy pharmaceutical companies aren’t explosive growers. Still, I didn’t see much in this earnings report to indicate that Teva could really make significant improvements.
Neither do analysts; collectively, they’re expecting lower per-share earnings for full-year 2022 compared to the previous frame, and only a 6% improvement in 2023. They also believe revenue growth in both years will be incremental. 
After the company announced its quarterly results, the stock rose timidly higher — maybe because of the drugs that Schultz mentioned.
Ultimately, while I can’t imagine Teva stock suffering any sort of crash, I wouldn’t expect it to rise much more in the coming months. That story might be different if any of its branded products catch fire in the medium to longer term.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy. –

There are numerous companies in the healthcare sector that have been outstanding performers on the stock exchange lately. Alas, Teva Pharmaceutical Industries (NYSE: TEVA) isn’t one of them. 

On Tuesday, May 3, the generic-drugs specialist published first-quarter results that showed notable declines in some of its fundamentals. Perhaps this marks the start of an even tougher bear market for the stock.

Meeting expectations

For the quarter, Teva’s revenue fell by 8% on a year-over-year basis to $3.66 billion. The company’s non-GAAP (adjusted) net profit also saw a slide, declining at a 13% clip to land at $609 million, or $0.55 per share.

Give some credit to the analysts following Teva stock — they were basically on the money with this one. Their collective estimate for revenue was very close to reality at $3.74 billion, while they hit a bullseye with a $0.55 per-share projection for adjusted, per-share net profit.

Image source: Getty Images.

During the pandemic, many patients chose to delay medical visits and procedures. With minimal to no restrictions in place, medical facilities seemed to continue as usual. However, the Israel-based pharmaceutical company didn’t benefit greatly from a global return to the doctor’s office. Its classic generics business saw a 15% drop in sales during the quarter in its top market, North America. Meanwhile, in both the Europe and the “international” markets (i.e., the world outside of those two continents), sales of these medicines were essentially flat.

That said, Teva notched several successes with other products. In the earnings release, the company quoted CEO Kare Schultz as saying that this year “is off to a solid start with the successful launch of a first generic version of Revlimid in the United States, and gains in market share for Ajovy both in the U.S. and in Europe, where it has solidified its leadership position as the second leading brand.”

Revlimid, developed by current Bristol Myers Squibb subsidiary Celgene, is a drug that treats multiple myeloma, mantle cell lymphoma, and some myelodysplastic syndromes (MDS). Ajovy is an injectable that targets migraines in adults. U.S. sales of Teva’s version of Revlimid only kicked off in March, while at $36 million, Ajovy comprises only a fraction of the company’s revenue.

Sluggish growth at best

Although Schultz put a positive spin on Teva’s first quarter, a trimming and narrowing of top-line guidance indicates the company is less confident about the future.

For the entirety of 2022, it now expects to post revenue of $15.4 billion to $16 billion, a shift from the company’s guidance earlier this year of $15.6 billion to $16.2 billion. The new forecast shows only a potential slight improvement, at best, over the 2021 result of $15.9 billion.

As for profitability, earnings before interest, taxes, depreciation, and amortization (EBITDA) should be $4.7 billion to $5 billion. While that guidance remains unchanged, it would represent maximally only a bump in growth (2021 EBITDA was $4.9 billion).

Investors are willing to accept that generics-heavy pharmaceutical companies aren’t explosive growers. Still, I didn’t see much in this earnings report to indicate that Teva could really make significant improvements.

Neither do analysts; collectively, they’re expecting lower per-share earnings for full-year 2022 compared to the previous frame, and only a 6% improvement in 2023. They also believe revenue growth in both years will be incremental. 

After the company announced its quarterly results, the stock rose timidly higher — maybe because of the drugs that Schultz mentioned.

Ultimately, while I can’t imagine Teva stock suffering any sort of crash, I wouldn’t expect it to rise much more in the coming months. That story might be different if any of its branded products catch fire in the medium to longer term.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.

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