Thesis
Teva pharmaceuticals (NYSE:TEVA) is one of the pharmaceutical companies that have been under significant scrutiny because of their price hiking. The company missed the latest two quarter earnings guidance consensus and I expect them to do so again in the fourth quarter. Not necessarily because the company will be doing significantly worse, but rather that they are being too optimistic in their guidance. While revenue stood steadfast at around $4.8 billion before the acquisition of Actavis, the company is now expecting to report between $6.2 billion and $6.5 billion in quarterly revenue. Even if we take the 3Q16 revenue of $5.6 billion, which includes the Actavis business, at face value we're still left looking for $700-900 million. While some might argue that this is due to new drug approvals, I do not think this is possible. I explain why, at best, these new drugs could deliver around $149 million in added revenue. I stress that this is in an extremely positive scenario. In conclusion, I find enough evidence to conclude an earnings miss, but since the volatility is not what I'd like it to be, I'll be abstaining from any short position.
