Teva Stock Declines Following Luke Warm Coverage Initiation

NEW YORK (TheStreet) -- Teva Pharmaceuticals (TEVA) shares are down 0.5% to $60.37 in early market trading on Wednesday after the stock was initiated with a "market perform" rating by analysts at Raymond James today.

The initiation comes as the company looks to increase its stake in rival and takeover target Mylan (MYL), who has previously rejected the company's $82 per share $40 billion merger bid, according to Reuters.

Last week the company revealed a 1.8% stake in Mylan, which is currently waging its own unsuccessful takeover bid of generic drug maker Perrigo (PRGO). 

In response to Friday's revelation, Mylan executive chairman Robert Coury wrote a letter to Mylan CEO Erez Vigodman stating in part, "It is time for Teva and its board to stop playing games with our company, its business, mission and strategy and its stakeholders."

"Teva and its board must stop pursuing what amounts to nothing more than an illusory alternative for our shareholders to the Perrigo transaction (as there is no formal offer or clear path to completion for a Teva transaction,)" he continued.

Additionally, Mylan has accused Teva's 1.8% stake as breaching U.S. antitrust regulations prohibiting the acquiring of stakes exceeding $76.3 million in rivals without first receiving regulatory approval.

Mylan claims that Teva's stake in the company exceeds that level. 

TheStreet Ratings team rates TEVA PHARMACEUTICALS as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TEVA PHARMACEUTICALS (TEVA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, expanding profit margins, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly increased by 50.77% to $1,354.00 million when compared to the same quarter last year. In addition, TEVA PHARMACEUTICALS has also vastly surpassed the industry average cash flow growth rate of -20.90%.
  • The gross profit margin for TEVA PHARMACEUTICALS is rather high; currently it is at 63.49%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, TEVA's net profit margin of 8.95% significantly trails the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • TEVA PHARMACEUTICALS's earnings per share declined by 40.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TEVA PHARMACEUTICALS increased its bottom line by earning $3.56 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($5.24 versus $3.56).
  • You can view the full analysis from the report here: TEVA Ratings Report

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