Teva Spirals as Woes Continue
By: Shlomo Cooper, Tradenet Chief Analyst
New High on NASDAQ, Sharp Declines in Teva
Wall Street ended up Tuesday thanks to solid earnings reports. The U.S. dollar (UUP) climbed to a high not seen in over a week on the background of technical buying and the political fallout in Europe. Despite that, U.S. stocks relinquished most of their gains from the beginning of the trading day, as crude fell in light of mounting evidence of the revival of American shale production. It seems that the production of crude from shale is back, and bigtime at that! Crude ended the day off 1.6%, closing at $52.17 per barrel.
The weakness in crude dragged down energy stocks, though these losses were offset by the gains in large tech names which spurred the NASDAQ on to a new all-time high. In summary for the day, the S&P 500 ended negligibly up by 0.02%, the NASDAQ tacking on 0.19%. The Russell 2000 (IWM) ended off 0.4%.
In the meantime, the earnings season is now more than half way over, firms’ Q4 2016 earnings expected to grow by 8.2%, which would make it the best performance in the last 9 quarters.
The U.S. dollar rose for the 5th day in a row, climbing to a level not seen in over a week, the gains coming in part because of bargain hunting, traders lifting the greenback from the bottom to which it had fallen after recording its worst January in 30 years. The dollar recorded its best performance since mid-January yesterday, its rise coming at the expense of the Euro, the continental bloc’s currency falling 0.8% to the $1.0665 level, its sharpest decline since December 15th, before slightly regaining its step and closing at $1.0696.
The Euro is facing difficulty on the background of renewed concerns about problems with Greek debt and signs that the leader of France’s far-right party, Marine Le Pen, is gaining momentum in advance of presidential elections. The political uncertainty weighed yesterday on stocks in France, which fell on the session.
Heavy-weight tech stocks gave both the S&P 500 and the NASDAQ a boost. Apple (AAPL) rose almost 1%, Google (GOOGL) climbing 0.9%.
Israeli pharmaceutical company, Teva (TEVA), sparked a drama of its own, after the surprise announcement that company CEO, Erez Vigodman, was stepping down. That, though, was not the only reason for the company’s slide yesterday; one of the main reasons for Vigodman’s resignation was the settlement reached with U.S. law enforcement agencies obligating Teva to pay $519 million because of allegations of bribery in countries like Mexico and Russia, the payouts having reportedly increased overseas sales. Beyond that, some of the company’s recent acquisitions were not positively received by Teva shareholders, especially its huge $40.5 billion purchase of Actavis Generics. The last nail in the coffin for Teva, which has shed 41% of its market cap in the last year, falling 11.2% this year alone, was the U.S. district court decision last month that a number of the company’s MS patents for Copaxone were no longer valid. The drug had been the company’s cash cow, responsible for 20% of sales and 40% of net profits. Teva ended sharply off yesterday by 6.3% at the $32.19 level. With that said, a number of analysts have bucked the trend, releasing buy recommendations for the stock, noting that the change of management is precisely what the company needs, giving the company a restart. Take for example analysts at Credit Suisse who have given the stock an “outperform” rating with a price target of $41, reflecting upside potential of 28%.
Among the reporters eliciting attention yesterday was Emerson (EMR), which soared 4.5% after announcing higher than expected earnings. General Motors (GM) tumbled 4.7% after the carmaker reported a Q4 revenue decline, partially attributable to the strength of the dollar against the pound and a forecast for stagnation in this year’s growth. Michael Kors (KORS) toppled 10.8%, after the handbag maker released a forecast for the current quarter that came out beneath the market’s consensus.
After Closing: Disney (DIS) grabbed headlines when reporting mixed results after closing, earnings coming out at $1.55 per share, beating expectations by 7 cents, revenues though coming to $14.8 billion, falling short of analysts’ $15.3 billion forecast. The number of subscribers to the ESPN sports network continues to be a sore point, with network revenues dropping 2%. The company’s film and merchandise divisions reported weak results, Frozen’s allure dissipating, along with that of Star Wars. Yesterday, DIS fell 0.56% in late trading.
On the S&P 500, 32 stocks rose to new 52-week highs, 4 dipping to new yearly lows; on the NASDAQ, 108 stocks recorded new 52-week highs, 40 falling to new yearly lows.
About 6.6 billion shares changed hands on U.S. exchanges, slightly beneath the 6.7 billion average over the last 20 trading days.
Wednesday: Crude will retake the spotlight, after having fallen 3% on aggregate this week. Weekly inventory figures will be released by the U.S. Dept. of Energy at 10:30 N.Y. time and will certainly grab investors’ attention.
Today’s earnings reports will include: AGN, TWX, GT, OC, and HUM before opening. WFM is reporting after closing, along with FISV.
Wednesday’s Hot Stocks: DIS, TWX, OC, BWLD, GILD, TEVA
Have a great trading day!
|Tuesday||10:00||JOLTS – Job Openings||–||Medium|
|Friday||8:30||Export Prices ex-ag.||–||High|
|Friday||10:00||Mich Sentiment – Prelim||97.9||High|
|TSN||Tyson Foods, Inc.||AM||Monday|
|CTSH||Cognizant Technology Solutions Corporation||AM||Monday|
|NOV||National Oilwell Varco, Inc.||PM||Monday|
|FOXA||Twenty-First Century Fox, Inc.||PM||Monday|
|VMC||Vulcan Materials Company||AM||Tuesday|
|MOS||The Mosaic Company||AM||Tuesday|
|CAH||Cardinal Health, Inc.||AM||Tuesday|
|OMC||Omnicom Group Inc.||AM||Tuesday|
|ORLY||O’Reilly Automotive, Inc.||PM||Tuesday|
|AKAM||Akamai Technologies, Inc.||PM||Tuesday|
|MCHP||Microchip Technology Incorporated||PM||Tuesday|
|GILD||Gilead Sciences Inc.||PM||Tuesday|
|DIS||The Walt Disney Company||PM||Tuesday|
|PXD||Pioneer Natural Resources Company||PM||Tuesday|
|SO||The Southern Company||AM||Wednesday|
|TWX||Time Warner Inc.||AM||Wednesday|
|ALK||Alaska Air Group, Inc.||AM||Wednesday|
|YUM||Yum! Brands, Inc.||PM||Wednesday|
|LVLT||Level 3 Communications, Inc.||PM||Wednesday|
|TSLA||Tesla Motors, Inc.||PM||Wednesday|
|PRU||Prudential Financial, Inc.||PM||Wednesday|
|OXY||Occidental Petroleum Corporation||AM||Thursday|
|CVS||CVS Health Corporation||AM||Thursday|
|RAI||Reynolds American Inc.||AM||Thursday|
|KO||The Coca-Cola Company||AM||Thursday|
|Q||Quintiles IMS Holdings, Inc.||AM||Thursday|
|CCE||Coca-Cola European Partners Plc||AM||Thursday|
|DTE||DTE Energy Company||AM||Thursday|
|AAP||Advance Auto Parts, Inc.||PM||Thursday|
|ATVI||Activision Blizzard, Inc.||PM||Thursday|
|XRAY||DENTSPLY SIRONA Inc.||AM||Friday|
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New York Strategy Swing
Today’s Picks – Swing “New-York Strategy