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As Teva Pharmaceutical Industries prepares to publish its 2007 guidance when it releases its fourth quarter results for 2006 next week, analysts are warning that deviation of the outlook below or above the market consensus will have a significant impact on the generic drugmaker's share price.
Analysts are not expecting any big surprises in the fourth-quarter numbers but all eyes rather will be focused on Teva's 2007 forecast. Back in the third quarter, Teva already said that it expected single-digit growth this year.
"2007 guidance may disappoint," said Citigroup analysts, warning of near-term risks to investors. "The market could react negatively if Teva publishes 2007 earnings per share growth below the consensus of $2.17 or if Teva makes another acquisition, investors could mark the shares down," they said.
Last year Teva's share price fell over 30 percent despite a record year for the business.
"2006 was the worst year for Teva's stock but the best year for the company," said Elah Alkalay, senior analyst at Israel Brokerage & Investment House. Still, this year Teva's stock price rebounded by over 10% partly boosted by expectations that 2008 will be better.
The consensus is that Teva will report $8.89 billion sales in 2007, and earnings per share of $2.16 or $2.17. Citigroup analysts cut their 2007 earnings per growth forecast by 1% to $2.08 but raised the 2008 forecast by 4% to $2.70. In a more optimistic forecast, Alkalay at IBI expects Teva to generate $9.17b. in 2007 sales and earnings per share of $2.23.
"We expect Teva shares to rise significantly during 2007, as the market prices in the 30% earnings per share growth we project for 2008," said Citigroup analysts, who have chosen Teva as their top pick in European generics for 2007. "Our analysis suggests underlying profitability is improving rapidly driven by booming inhalers, acquisition-driven cost synergies and an improving portfolio. This has not been understood by the market - certainly, we believe it is not reflected in the current valuation."
Regarding the fourth quarter results, IBI predicts $2.44b. in sales and earnings per share of $0.50, while analysts at Clal Finance Batucha forecast fourth quarter sales of $2.27b.
For the first time, Teva will release information on Copaxone sales.
IBI forecasts that fourth-quarter sales of the drug will have grown 16% to $374m.