When generics giant Teva Pharmaceuticals (NYSE:TEVA) posted flat revenue growth, the stock backed down from $10. What happens next for the stock after the lowered guidance?
In the second quarter, Teva posted an EPS of 59 cents (GAAP EPS of 19 cents). Revenue grew by 0.8% to $3.9 billion. For 2021, Teva set a net revenue range of around $16 billion. EPS for the year is $2.50 to $2.70. The strong free cash flow of $2.0 to $2.3 billion suggests that the debt reduction plans are unchanged.
Teva paid off around $500 billion in debt and now has $22.7 billion.
Teva’s FCF suggests that it has the room to pay down its debt until 2023. Investors should hold the stock with at least a two-year timeframe in mind.
Investors seeking exposure to the generic drug market may consider Endo International (NASDAQ:ENDP) and Viatris (NASDAQ:VTRS). Conversely, Teva’s high debts are not a concern.
On slide 19 in the earnings presentation, Teva is steadily lowering its net debt to EBITDA. Furthermore, health-care systems need Teva. For example, Teva helped nine key European markets save $9.6 billion in 2020. The health system needs generic medicines to cut costs. Teva is positioning itself to be the dominant player in this space.
TEVA stock is a good holding for the patient investor.
