E A Sell-Off Day

Fertilizers sold briskly thanks to higher realized prices in North America and more overseas demand. What comes next is that the prospect of higher soybean and corn tariffs against the US will cause problems later in the current year and in 2019. Poor harvests last autumn in Russia and this spring in Argentina boosted NTR fertilizer demand YTD. NTR predicts continued US farm spending despite the trade war until the harvest, and if there is no resolution afterward "we will become more concerned," said CEO Chuck Magro. He may be right as I suggested in my opener. But I am a careful investor.

NTR revised its forecast for the full year without taking the politics into account, to EPS of $2.40-2.70 from $2.20-2.60. There are still many one-offs that may come into play later this year. The stock is up 5.4% to $57.30+. Sell half.

*Teva beat on profits but not on sales and the stock fell over 5% in European trading and 9% to $20.265 at the US opening but recovered a bit.

EPS was 78 cents vs the Capital IQ consensus of 64 cents excluding one-time items. For the half, it hit $1.71/sh. A bigger fall was in revenues fell 17.8% from the last Q2 to $4.7 bn and also missed the consensus of $4.75 bn, hit by a 29% of drip in generic sales in North America to $947 mn because of competition and a 46% drop in sales of out-of-patent Copaxone because of other generic makers competing in the multiple sclerosis space. TEVA also lost some of its own generics dominance with Concerta

Copaxone sales actually rose in Europe. Teva also was hurt by worries about its migraine drug meeting delays, but CEO Kåre Schultz says fremanezumab will get the FDA green light in mid-Sept. and will be priced to match Amgen's migraine drug price of $6000/yr per patient. Teva's drug is taken quarterly rather than monthly which may make it popular.

He also blamed write-downs for producing a loss in the GAAP earnings from Actavis and the goodwill from Rimsa (of Mexico) but backed the non-GAAP numbers. These were errors by his predecessors.

Net debt was reduced in Q2 to $30.2 bn, down $600 mn from the close of Q1, mostly because of exchange rate factors although Mr. Schultz and CFO Mike McClellan spoke of it now being only $28.4 bn. Schultz also predicted that "the bottom of the valley" for TEVA will be next year and hasn't happened yet.

Upbeat Schultz raised Teva's full-year EBITDA guidance of $5.-5.3 bn from $4.9-5.2 bn and his free cash flow forecast to $3.2-3.4 bn from $3-3.2 bn excluding capital expenditure. His EPS prediction for the full year is $2.55-2.80 vs an estimate at the end of Q1 of $2.40-2.65. His revenue guidance was $18.5-19 bn for the year, unchanged. He says the restructuring program is on schedule. This is based on streamlining the different lines into a classic regional set-up merging specialties, generics, biosimilars, and patented drug marketing. He also said there would be no late-stage acquisitions but more organic growth with the focus on biosimilars and biologics which it is building a facility for in Germany.

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