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Teva Stock Rallies After Q1 Earnings, Q2 Guidance Reassure Market
Generic and specialty drug giant Teva Pharmaceutical Industries ( TEVA ) beat analysts’ Q1 earnings estimates and guided Q2 in line with expectations Monday, sending the stock up in early trading. Teva’s Q1 earnings excluding one-time items came to $1.20 a share, down 12% from the year-earlier quarter but 3 cents above analysts’ consensus. Revenue shrank 3.5% to $4.81 billion, but that’s more than $30 million past consensus. Teva guided Q2 earnings at $1.16 to $1.20 a share, down from $1.43 a year ago and bracketing consensus. It forecast Q2 revenue to decline slightly to $4.7 billion to $4.9 billion, on the low side of analysts’ $4.89 billion. Teva stock was up 4.5% in early trading on the stock market today , near 52.50, perhaps as a relief rally after the whole industry got spooked Friday by Endo International ‘s ( ENDP ) comments about pricing pressure in generic drugs , driving it to slash its full-year guidance. Teva stock fell to a more than 18-month low of 50 on Friday. Teva declined to offer 2016 guidance until it closes its buyout of Allergan ‘s ( AGN ) generics unit Actavis, which is expected to happen next month, but its Q2 guide did not suggest a dramatic underperformance. Credit Suisse analyst Vamil Divan did note, however, that the generics business, which makes up about 45% of total revenue, missed Wall Street’s estimate, though this was balanced out by a beat on the specialty side. “U.S. Generics revenues declined 32% year over year, mainly from a decline in sales of Nexium and Pulmicort,” Divan wrote in a research note. “Specialty Medicine revenues increased by 10% year over year, driven primarily by higher sales of CNS (central nervous system) and respiratory products.” Allergan stock, which also sold off Friday, was up 4.5% in early trading Monday. Endo stock was down 2.5%.
Market Lab Report – Premarket Pulse 5/9/16
Major averages rose on lower volume with the S&P 500 getting support at its 50-day moving average. Real support usually is accompanied by higher trading volumes which was not the case on Friday. In addition, as an aggregate, defensive names continue to outshine leading stocks. Utility stocks have been on a tear and gold has come to life as the loss of confidence in central banks and governments continue to rise. Despite the Federal Reserve’s William Dudley saying he expects two rate hikes later this year, fed futures shows the odds of the first hike only rise above 50% when they meet on December 21, thus should the global economy remain in a quagmire or continue their decelerating trend, any rate hikes may be put off until 2017. It is also possible the Fed reverses its prior rate hike and begins to adopt negative rates as Yellen has kept the door open to that possibility. While the market is in a logical position from which to launch a reaction rally and bounce, it may be short-lived. Such a rally might bring short-sale targets back into shortable range which we discuss in our SSS report.Â