The Zacks Analyst Blog Highlights: Teva Pharmaceutical Industries, Biogen, Actavis, Akorn and Dow Chemical

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Nov 01, 2013, 09:30 ET

CHICAGO, Nov. 1, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Teva Pharmaceutical Industries Ltd. (NYSE:TEVA-Free Report), Biogen (Nasdaq:BIIB-Free Report), Actavis plc (NYSE:ACT-Free Report), Akorn, Inc. (Nasdaq:AKRX-Free Report) and The Dow Chemical Company (NYSE:DOW-Free Report).

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Here are highlights from Thursday's Analyst Blog:

Teva Slumps on CEO Departure

Shares of Teva Pharmaceutical Industries Ltd. (NYSE:TEVA-Free Report) fell 8.09% with the company announcing the departure of its President and Chief Executive Officer (CEO), Dr. Jeremy Levin. Eyal Desheh, Teva's Executive Vice President and Chief Financial Officer, will act as the interim President and CEO until a permanent replacement is found.

Dr. Levin was yet to complete 2 years at Teva at the time of his departure. His departure comes a few days after rumors about disagreements between him and the Board surfaced.

On a conference call, Teva's Chairman said that although Dr. Levin and the Board were fully aligned on the strategy and direction of the company, there was a difference in views regarding the execution of the strategy.

Teva's Board said it remains committed to its strategy which includes the reduction of assets that are no longer fitting into the core business or are not critical to its future, scaling down of oversized parts of the company while the company will keep focusing on growing its generics business and core R&D programs. Focus areas remain high-value complex generics, expansion in emerging markets and broadening of the specialty medicines and OTC business portfolio.

The company is also seeking to cut costs and expects to reduce year-over-year costs by $1 billion. Earlier this month, Teva had said that it will cut its work force by about 5,000 employees or 10%. A major part of the reduction will be completed by the end of next year.

2013 Outlook Narrowed

Teva narrowed its 2013 outlook and now expects earnings of $4.95 to $5.05 per ADS on revenues of $19.7 billion – $20.3 billion. Earlier, the company was expecting to achieve the mid-point of its guidance range of $4.85 – $5.15 per ADS on total net revenues of $19.5 – $20.5 billion. The Zacks Consensus Estimate for revenues and earnings is currently $20.0 billion and $4.99, respectively.

Teva is going through a transition period. Headwinds include EU pricing pressure, potential new competition for branded products and fewer generic product launches compared to 2012. A major challenge for the company will be for Teva to replace Copaxone (multiple sclerosis) revenues once generics enter the market. With the U.S. Federal Court of Appeals delivering unfavorable rulings regarding the validity of certain Copaxone patents, generic competition could materialize in May 2014, much sooner than expected. Additional competition has entered the multiple sclerosis market in the form of Biogen's (Nasdaq:BIIB-Free Report) Tecfidera which is off to a strong start.

The sudden departure of Dr. Levin comes on top of the above-mentioned headwinds. At present, concerns remain about finding a new CEO who will be willing to take on the post especially considering the rumors regarding rifts between the previous CEO and the Board.

Teva currently carries a Zacks Rank #3 (Hold). Investor focus will remain on additional commentary regarding the company's strategy on the third quarter conference call. Guidance for 2014 will be provided in the second week of December.

At present, companies that look more attractive include Actavis plc (NYSE:ACT-Free Report) and Akorn, Inc. (Nasdaq:AKRX-Free Report). Both are Zacks Rank #2 (Buy) stocks.

Dow Set to Retire Debt

In a bid to reduce its debt, The Dow Chemical Company (NYSE:DOW-Free Report) has launched cash tender offers for up to $500 million aggregate principal amount of notes issued by the company and its fully-owned unit Rohm and Haas Company. The company has appointed BNP PARIBAS and BofA Merrill Lynch as dealer managers for the tender offers. The offer is set to expire on Nov 27, 2013.

The move highlights Dow's strategy to enhance its financial flexibility. So far this year, the company has cut its debt by $2.4 billion which has in turn led to declined interest expense of about $120 million. Further reduction in interest expense will allow Dow to post increased earnings and deliver healthy returns to its shareholders.

Dow's continued efforts to de-leverage its balance sheet led to a reduction in net debt-to-total capitalization ratio to 34.7% in the third quarter of 2013, down from 39.7% a year ago. The company generated operating cash flows of $1.4 billion in the quarter, up 27% year over year.

Dow raked in a profit of $594 million or 49 cents a share in the third quarter, a 20% rise from $497 million or 42 cents a share registered a year ago. Barring costs associated with its restructuring program, Dow earned 50 cents a share in the quarter. That, however, missed the Zacks Consensus Estimate by 4 cents.

Revenues crept up roughly 1% year over year to $13,734 million in the reported quarter as gains from agricultural sciences, coatings, performance plastics and electronics were offset by declines in performance materials and feedstocks and energy. Sales in emerging markets rose 5%. However, revenues missed the Zacks Consensus Estimate of $13,946 million.

Dow currently carries a Zacks Rank #3 (Hold).

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