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What's in the Cards for Novartis (NVS) This Earnings Season?
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Novartis AG (NVS - Free Report) is scheduled to report fourth-quarter 2017 results on Jan 24, 2018.
The Swiss pharmaceutical company’s stock has rallied 3.2% in the last six months compared with the industry's 10.4% gain.
Novartis has an excellent track record. In the last quarter, Novartis delivered a positive earnings surprise of 3.2%. The company posted an average positive earnings surprise of 3.25% in the trailing four quarters. Let's see how things are shaping up for this announcement.
Factors at Play
Concurrent with the third-quarter results, Novartis reiterated its annual guidance. Net sales are expected to be in line with the 2016 levels after including the impact of continued genericization of Gleevec/Glivec in the United States and Europe.
Novartis operates under three segments: Innovative Medicines (Pharmaceuticals), Alcon and Sandoz (Generics). Novartis has a strong oncology portfolio of drugs like Afinitor, Exjade, Jakavi, Zykadia, Tasigna, Jadenu, and Kisqali. The recent approval of Kymriah for acute lymphoblastic leukemia is a major boost for Novartis, given the potential in the CAR-T therapy space. Sales from this division are expected to grow marginally.
New products like Cosentyx and Entresto are expected to boost the top line. Cosentyx has been strong and the company has grabbed market shares from rivals like AbbVie, Inc.'s (ABBV - Free Report) Humira and Amgen. Inc's (AMGN - Free Report) Enbrel. Cosentyx achieved the blockbuster status in 2016 and recorded over $1 billion of sales. While Entresto is expected to record $500 million revenues, sales of Cosentyx are projected to reach $2 billion in 2017.
Additionally, Novartis' generic arm, Sandoz, is making efforts to strengthen its biosimilars portfolio. The company plans to launch five biosimilars of major oncology and immunology biologics across key geographies by 2020. The company is, however, facing significant pricing pressures which might impact the fourth-quarter results. The company now expects sales to decline or broadly in line.
Meanwhile, the loss of exclusivity of some of the key drugs in Novartis' portfolio will continue to hurt the company's top line. The company's blockbuster drug, Diovan, is facing stiff generic competition in the United States, the EU and Japan. Gleevec lost exclusivity in the United States in February 2016 and in the EU in December 2016, thereby leading to generic competition. Exforge is also facing generic competition in the United States and the EU. Further, the oncology drugs are facing new competition in the form of immuno-oncology therapies. The negative impact of generic competition is expected to impact sales by $2.5 billion.
The performance of the ophthalmology division, Alcon business was weak due to competition faced by intraocular lens and a slowdown in demand for equipment purchases. Consequently, Novartis took a few steps to revive the business. The turnaround has been encouraging and management believes creating a standalone company via a capital markets exit could create additional shareholder value. A decision is expected in the first half of 2019, depending on Alcon’s performance in the future.
Earnings Whispers
Our proven model does not conclusively show that Novartis will beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. Unfortunately, that is not the case here, as you will see below.
Zacks ESP: Earnings ESP for Novartis is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.16. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Novartis currently carries a Zacks Rank #3. Although the rank is favorable, the company's 0.00% ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here is one stock in the healthcare sector that you may want to consider, as our model shows that it has the right combination of elements to post earnings beat this quarter.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
What's in the Cards for Novartis (NVS) This Earnings Season?
Novartis AG (NVS - Free Report) is scheduled to report fourth-quarter 2017 results on Jan 24, 2018.
The Swiss pharmaceutical company’s stock has rallied 3.2% in the last six months compared with the industry's 10.4% gain.
Novartis has an excellent track record. In the last quarter, Novartis delivered a positive earnings surprise of 3.2%. The company posted an average positive earnings surprise of 3.25% in the trailing four quarters. Let's see how things are shaping up for this announcement.
Factors at Play
Concurrent with the third-quarter results, Novartis reiterated its annual guidance. Net sales are expected to be in line with the 2016 levels after including the impact of continued genericization of Gleevec/Glivec in the United States and Europe.
Novartis operates under three segments: Innovative Medicines (Pharmaceuticals), Alcon and Sandoz (Generics). Novartis has a strong oncology portfolio of drugs like Afinitor, Exjade, Jakavi, Zykadia, Tasigna, Jadenu, and Kisqali. The recent approval of Kymriah for acute lymphoblastic leukemia is a major boost for Novartis, given the potential in the CAR-T therapy space. Sales from this division are expected to grow marginally.
New products like Cosentyx and Entresto are expected to boost the top line. Cosentyx has been strong and the company has grabbed market shares from rivals like AbbVie, Inc.'s (ABBV - Free Report) Humira and Amgen. Inc's (AMGN - Free Report) Enbrel. Cosentyx achieved the blockbuster status in 2016 and recorded over $1 billion of sales. While Entresto is expected to record $500 million revenues, sales of Cosentyx are projected to reach $2 billion in 2017.
Additionally, Novartis' generic arm, Sandoz, is making efforts to strengthen its biosimilars portfolio. The company plans to launch five biosimilars of major oncology and immunology biologics across key geographies by 2020. The company is, however, facing significant pricing pressures which might impact the fourth-quarter results. The company now expects sales to decline or broadly in line.
Meanwhile, the loss of exclusivity of some of the key drugs in Novartis' portfolio will continue to hurt the company's top line. The company's blockbuster drug, Diovan, is facing stiff generic competition in the United States, the EU and Japan. Gleevec lost exclusivity in the United States in February 2016 and in the EU in December 2016, thereby leading to generic competition. Exforge is also facing generic competition in the United States and the EU. Further, the oncology drugs are facing new competition in the form of immuno-oncology therapies. The negative impact of generic competition is expected to impact sales by $2.5 billion.
The performance of the ophthalmology division, Alcon business was weak due to competition faced by intraocular lens and a slowdown in demand for equipment purchases. Consequently, Novartis took a few steps to revive the business. The turnaround has been encouraging and management believes creating a standalone company via a capital markets exit could create additional shareholder value. A decision is expected in the first half of 2019, depending on Alcon’s performance in the future.
Earnings Whispers
Our proven model does not conclusively show that Novartis will beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. Unfortunately, that is not the case here, as you will see below.
Zacks ESP: Earnings ESP for Novartis is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.16. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Novartis currently carries a Zacks Rank #3. Although the rank is favorable, the company's 0.00% ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here is one stock in the healthcare sector that you may want to consider, as our model shows that it has the right combination of elements to post earnings beat this quarter.
Vertex Pharmaceuticals Incorporated (VRTX - Free Report) has an Earnings ESP of +6.90% and a Zacks Rank #1. The company is scheduled to release fourth-quarter results on Jan 31. the complete list of today’s Zacks #1 Rank stocks here..
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>