Despite falling 34% since August 2016 to the $35 level, some investors believe Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) can fall even further to below $30. Why are they so bearish on the stock?
Management lowered its 2017 earnings per share on Friday and the Teva shares reacted by falling 7.5% on the day. Based on the midpoint of management’s 2016 and 2017 estimations, Teva’s 2017 EPS is expected to be nearly 1% lower. The 2017 estimation is almost 6.3% lower than the consensus of $5.44.
Why have Teva Pharmaceutical shares fallen 34% since August?
Moreover, Teva has been losing the patent protections for Copaxone in the U.S, as outlined in these Bloomberg articles in August and September 2016. You can’t blame the market for being worried. Copaxone accounted for about 20% of Teva’s revenue last year.
In the 2017 guidance, management believes that in the downside case, the potential impact of the two generic competitors to Copaxone 40 mg launching in February in the U.S. could reduce its revenue by $1-1.2 billion and its earnings per share by $0.65 to $0.80.
Amgen, Inc. (NASDAQ:AMGN) now yields 3% after it raised its dividend by 15% for Q1 2017. This marks the start of its sixth consecutive year dividend hike. Is the biotech company a good buy today? What kind of total returns can you expect from an investment today?
Stable growing earnings, stable growing dividend
Thanks partly to share buybacks, Amgen has generated stable earnings per share (“EPS”) growth for at least 18 years. Even after the 15% raise, Amgen’s payout ratio is expected to remain below 40%.
A group of 37 analysts believes Amgen can deliver EPS growth of 6.9-7.3% in the next 3-5 years. The high single-digit earnings growth rate and reasonable payout ratio should allow Amgen to continue its dividend growth streak.
Moreover, any share repurchases from Amgen will help solidify that earnings growth.
Spin Master Corp’s (TSX:TOY) 10% pullback in the last five days due to the bad press from Hatchimal complaints could be a long-term buying opportunity. After all, the children’s entertainment company is not a one-trick pony; it has a diverse portfolio of products. Further, it has passionate and capable management. It has won multiple awards across different product categories and has made successful acquisitions.