Will Teva's (TEVA) Earnings Streak Continue in Q1? - Analyst Blog

Teva Pharmaceutical Industries Limited TEVA is scheduled to report its first-quarter 2015 earnings results on Apr 30, before the opening bell.

Teva’s performance in 2014 has been mostly encouraging with the company reporting positive earnings surprises three of the last four quarters. The average earnings surprise over the last four quarters is +2.03%.

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

Factors at Play

Teva’s generic segment in the U.S., which had remained flat in the fourth quarter of 2014, should benefit from the launch of the generic version of Nexium. Meanwhile, in the branded segment, Copaxone should continue to grow modestly in the U.S. Copaxone could well benefit from the concerns surrounding the use of Biogen’s BIIB oral multiple sclerosis (MS) treatment, Tecfidera.

However, negative currency movement could play spoilsport and cut into total revenues. Teva continues to focus on its cost reduction and share repurchase program. We note that Teva expects earnings per share for the first half to be around 48% of the total with the second half being slightly higher.

On the first quarter call, focus will remain on Teva’s plans to acquire Mylan MYL as well as the FDA’s approval of the first generic version of Copaxone 20 mg. Investors will be keen to know Teva’s progress in converting patients to Copaxone 40 mg thrice-weekly. On the fourth quarter call, Teva had said that the 40 mg formulation accounted for more than 60% of total Copaxone scrips.

Earnings Whispers?

Our proven model shows that Teva is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.79%.. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.

The combination of Teva’s Zacks Rank #3 and +0.79% ESP makes us confident in looking for a positive earnings beat on Apr 30.

Stocks That Warrant a Look

Here is another stock with a presence in the generic market that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for Actavis ACT is +1.04% and it carries a Zacks Rank #2 (Buy). The company is scheduled to release results on May 11.
 

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