Credit Suisse Upgrades Teva After Job Cuts Announced

Impressed with the turnaround initiatives at Teva Pharmaceutical Industries Ltd (ADR) (NYSE: TEVA), an analyst at Credit Suisse upgraded the company's shares.

The Analyst

Credit Suisse analyst Vamil Divan upgraded shares of Teva from Underperform to Neutral and increased the price target from $8 to $20.

The Thesis

Investor sentiment toward Teva is likely to improve with every move new CEO Kare Schultz makes to turn the company around, Divan said in a note. Schultz merged the specialty andgGenerics businesses first while also ousting division heads in his first month on the job, the analyst said. 

Just six months after taking over, Schultz unexpectedly announced an aggressive cost cutting plan Thursday, according to Credit Suisse. 

The plan includes the elimination of over 25 percent of the workforce and a dividend suspension for ordinary shares and ADSs. By the end of 2019, the company expects its cost base to be trimmed by $3 billion.

Credit Suisse, while stating that successful follow-through is of paramount importance, expressed encouragement at the CEO's previous track record at Lundbeck — and the plan he's laid out.

"We await more details on the plan and look for signs of successful execution before getting comfortable enough to fully recommend the stock, but we see things heading in the right direction," Credit Suisse said.

As such, the firm raised its earnings per share estimates for 2017, 2018 and 2019 to $3.95, $2.91 and $3.14, respectively, with the firm noting that its 2017 earnings per share estimate is above the company's guidance due to a $201-million reduction in its cost estimate. 

The Price Action

Teva shares are down a whopping 49 percent year-to-date thanks to a steep slump in early August.

The stock was up 6.13 percent at $18.36 at the time of publication. 

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