Citigroup: Buy Teva

Countering the market's disappointment, Citigroup says, "Teva’s first quarter results were bang-in-line with our forecasts."

"Teva’s 1Q06 results were BANG-IN-LINE with our forecasts," write Citigroup's market analysts in a note released today, countering the market's disappointment with the generic drug maker's results that has sent the share price into a dive.

Teva's guidance too, says Citigroup, is in line with its forecast, though below the market consensus. Teva gave guidance of $1.82-1.90 earnings per share for 2006. Citigroup's forecast is $1.87, while the consensus analysts' estimate was $1.92. Citigroup notes that the guidance does not take into account possible exclusivity on its generic version of Merck's cholesterol treatment Zocor.

“As a reminder, we are bullish about Teva’s prospects on a 12-month view, but cautious in the short term as we believe increasing risks and tough generic environment may not be fully priced in.

"We are reviewing our financial model and valuation; for now we reiterate Buy/ High Risk (1H) rating and $51 price target." Citigroup's note concludes.

Lehman Brothers too is standing its ground on Teva. The note it released today says, "With Teva shares trading at 18x our 2006 estimate, we feel that overblown concerns about growth beyond 2006 has created an attractive opportunity, particularly for longer term investors, with our historical valuation analysis further supporting a favorable risk/reward profile at current levels"

Lehman Brothers reiterates its "Overweight" rating for Teva, and maintains its earnings per share forecast for 2006 of $1.93, above Teva's guidance range. The forecast assumes no exclusivity on Zocor.

Deutsche Bank too maintains its "Buy" rating for Teva, though the bank cuts its price target, saying, "While we were disappointed with the skimpy Q1 result and lower than expected guidance, we are maintaining our BUY rating, based on 1) the anticipated increase in the number and size of generic opportunities, 2) the depth of the pipeline, 3) likely more substantial Ivax cost synergies, 4) potential upside from the non-CFC and other branded aerosol opportunities, and 5) a reasonable valuation trading at 17x our 2007 Teva EPS estimate.

"Our new 12-month price target is $44 (vs $48 previously)."

On the Tel Aviv Stock Exchange, Teva shares are at NIS 170.90, 2.4% below yesterday's close, but higher than levels seen earlier in the session, and 5% above yesterday's closing price in New York of $37.56.

Published by Globes [online], Israel business news - www.globes.co.il - on May 11, 2006

© Copyright of Globes Publisher Itonut (1983) Ltd. 2006

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