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BHC and Teva: How Free Cash Flow and Net Debt Stack Up

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Free cash flow projections

Bausch Health Companies (BHC) and Teva Pharmaceutical (TEVA) reported free cash flow of $1.27 billion and $1.79 billion, respectively, in fiscal 2018. In its fourth-quarter earnings investor presentation, Bausch Health Companies has guided for cash flow from operations in the range of $1.5 billion to $1.6 billion in fiscal 2019.

Wall Street analysts have projected Bausch Health Companies’ free cash flow to be $1.96 billion, $1.89 billion, and $3.19 billion for fiscal 2019, fiscal 2020, and fiscal 2021, respectively, which implies a YoY change of 54.79%, -47.25%, and -11.97% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

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According to the fourth-quarter earnings investor presentation, Teva Pharmaceutical (TEVA) expects to report free cash flow in the range of $1.6 billion to $2.0 billion in fiscal 2019. Wall Street analysts have projected Teva Pharmaceutical’s free cash flow to be $3.15 billion, $3.56 billion, and $3.74 billion for fiscal 2019, fiscal 2020, and fiscal 2021, respectively, which implies a YoY change of 75.58%, 13.07%, and 5.02% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

Teva Pharmaceutical is thus expected to generate higher free cash flow as compared to Bausch Health Companies from fiscal 2019 to fiscal 2021.

Net debt projections

According to its fourth quarter earnings conference call, Bausch Health Companies plans to use around $1.0 billion worth of cash either to reduce debt or for bolt-on acquisitions.

Wall Street analysts have projected Bausch Health Companies’ net debt to be $22.80 billion, $21.78 billion, and $19.16 billion, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively, which implies a YoY change of 57.48%, -4.45%, and -11.97% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

According to the company’s fourth-quarter earnings investor presentation, Teva Pharmaceutical expects to reach a cash-to-earnings percentage of more than 80% and net debt to EBITDA ratio of less than 3x in the next three to five years. The company plans to utilize its cash flow to pay down debt rather than raising funds by diluting equity.

Wall Street analysts have projected Teva Pharmaceutical’s net debt to be $24.66 billion, $21.74 billion, and $18.17 billion, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively. These estimates imply a YoY change of -9.13%, -11.82%, and -16.42% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

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