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The Zacks Analyst Blog Highlights: Hanesbrands, Teva Pharmaceutical, Novartis, Biogen Idec and Actavis

January 28, 2014

CHICAGO, Jan. 28, 2014 /PRNewswire/ — Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Hanesbrands Inc. (NYSE:HBI-Free Report), Teva Pharmaceutical Industries Limited (NYSE:TEVA-Free Report), Novartis (NYSE:NVS-Free Report), Biogen Idec (Nasdaq:BIIB-Free Report) and Actavis (NYSE:ACT-Free Report).

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Here are highlights from Monday’s Analyst Blog:

Can Hanesbrands (HBI) Keep the Streak Alive?

Hanesbrands Inc. (NYSE:HBI-Free Report) is set to report fourth-quarter fiscal 2013 results on Jan 29. Last quarter, it posted a positive surprise of 7.8%. Let us see how things are shaping up for this announcement.

Factors to Be Considered This Quarter

Hanesbrands has been reporting decent earnings results for the past few quarters backed by the strategic initiative — Innovate-to-Elevate.

In spite of delivering mixed results in the third quarter, Hanesbrands upped its earnings and sales guidance for fourth-quarter fiscal 2013 on the back of opportunity to expand its margins in the coming quarter due to lower cotton costs and the Innovate-to-Elevate strategy, which focuses on high-margin products.

Hanesbrands raised the earnings per share guidance to a range of $3.75 to $3.85 from $3.50 to $3.65. Management expects the Maidenform acquisition contributed 10 cents to the earnings upside. The company expects operating profits between $580 million and $590 million for the year, higher than the previous range of $550 million to $575 million. Net sales are expected slightly above $4.6 billion compared with $4.55 billion in the year-ago period.

Earnings Whispers?

Our proven model does not conclusively show that Hanesbrands is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimate. However, that is not the case here due to the following factors:

Zacks ESP: ESP for Hanesbrands is 0.00%.

Zacks Rank #3 (Hold): Hanesbrands’ Zacks Rank when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Teva Falls on Negative CHMP Opinion

Teva Pharmaceutical Industries Limited (NYSE:TEVA-Free Report) and Active Biotech announced that their oral multiple sclerosis (MS) candidate, Nerventra, received a negative opinion from the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP). The companies are looking to get the candidate approved for the treatment of relapsing-remitting multiple sclerosis (RRMS).

The CHMP rendered a negative opinion as it believes that the potential risks associated with Nerventra outweigh the benefits based on currently available data. Data found in animal studies – a higher occurrence of cancer after long-term exposure to Nerventra – and chances of an adverse effect on the unborn baby when taken by pregnant women, led to the CHMP opinion. Teva and Active Biotech are planning to request a re-examination of the CHMP opinion. Teva’s shares fell 2.45% on the news.

Our Take

We are disappointed with CHMP’s opinion on Nerventra. The successful development and launch of Nerventra would help strengthen Teva’s multiple sclerosis drug portfolio. Teva already has a multiple sclerosis product in its portfolio – Copaxone.

However, Copaxone could start facing generics this year. Last month, Teva provided guidance for 2014 based on two scenarios related to Copaxone – Copaxone remaining exclusive and Copaxone going generic. The entry of Copaxone generics this year could cut total revenues by about $500 million and earnings by 60 cents.

We note that several oral multiple sclerosis therapies are currently available including Novartis‘ (NYSE:NVS-Free Report) Gilenya and Biogen Idec‘s (Nasdaq:BIIB-Free Report) Tecfidera among others. Competition in the oral multiple sclerosis market is intense and Nerventra needs to demonstrate superior efficacy and safety to gain share in this market.

Teva carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks include Actavis (NYSE:ACT-Free Report) carrying a Zacks Rank #2 (Buy).

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