Does Teva Have Attractive Cash Flow and Net Debt Profiles?


Feb. 19 2019, Updated 9:00 a.m. ET

Free cash flow projections

In its fourth-quarter earnings investor presentation, Teva Pharmaceutical (TEVA) guided for free cash flow of $1.6 billion–$2.0 billion in 2019. Analysts expect the company’s free cash flow to rise 0.77% YoY (year-over-year) to $3.38 billion in 2019, 10.14% YoY to $3.73 billion in 2020, and 2.18% YoY to $3.81 billion in 2021.

In 2018, Teva Pharmaceutical reported free cash flow of $3.7 billion, in line with the latest guidance provided by the company. In 2018, the company reported multiple upward revisions to its 2018 free cash flow guidance, from $2.6 billion–$2.8 billion in February to $3.0 billion–$3.2 billion in May to $3.2 billion–$3.4 billion in August and finally to $3.6 billion–$3.8 billion in November.

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Debt projections

Analysts expect Teva Pharmaceutical’s net debt to drop 9.11% YoY to $24.63 billion in 2019, 11.90% YoY to $21.70 billion in 2020, and 13.55% YoY to $18.76 billion in 2021.

At the end of 2018, Teva Pharmaceutical’s net debt was $27.1 billion, a YoY fall of $4.4 billion (or 14%) despite new issuances worth $4.5 billion in March. According to the company’s fourth-quarter earnings conference call, it used its cash flow to repay senior notes worth $4.2 billion and term loans worth $3.4 billion in 2018. Teva Pharmaceutical also reported an increase of $0.8 billion in its cash balance and a benefit of $0.4 billion due to foreign exchange in 2018.

Tax rate projections

In its fourth-quarter earnings investor presentation, Teva Pharmaceutical guided for a tax rate of 16% in 2019, a YoY increase of 200 basis points. Analysts expect Teva Pharmaceutical’s tax rate to rise 214 basis points YoY to 16.14% in 2019, seven basis points YoY to 16.21% in 2020, and four basis points YoY to 16.25% in 2021.

Next, we’ll discuss Teva Pharmaceutical’s key growth drivers.


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