JPMorgan Bank today lowered Teva‘s rating (4,175.00.94% to the personal portfolio) and recommends selling Teva shares. This is due to concerns over the performance of the generic drug division in the United States and the company’s growing debt levels.
Bank analyst Chris Scott lowered Teva’s rating to a “neutral yield” from a neutral rating. Only 6% of the companies covered by JPMorgan’s analysts have such low ratings. In explaining the decision, Scott noted the challenges facing Teva’s generic drug division in the US, which he believes will not experience growth until 2019. He also mentioned the competition for Copaxone and the high level of Teva’s debt stemming from the acquisition of Actis.
“We see more attractive opportunities elsewhere in the sector and do not see a reason to step into TEVA shares at current levels.
While Teva’s recent appointment of Kare Schultz as President and CEO (joined Nov 1) represents a clear positive in our view, adding a highly creditable executive with significant industry experience, we do not see any quick fixes for Teva…
Overall, we believe Kare Schultz has the right background/experience set to evaluate and execute on restructuring opportunities in the Teva portfolio having successfully implementing a two-year restructuring program at Lundbeck with cost reductions exceeding expectations. However, with declining core business performance, we expect Teva’s leverage to reach >5x in 2018, limiting the new management team’s financial flexibility as it pursues a new strategic plan.”
Scott’s recommendation joins last week’s decision by the credit rating agency Fitch, which lowered Teva’s credit rating to junk. These decisions are made while the company’s share plummeted 68% since the beginning of the year and 16% in the third quarter, while the S & P 500 gained 15%.