Today's Must Read
New Drugs Boost Novartis (NVS) Amid Weak Generics Business
Mondelez (MDLZ) Organic Sales Gain on Solid Pricing Actions
Tuesday, March 3, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Merck (MRK), Novartis (NVS) and Mondelez International (MDLZ). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Merck’s shares have underperformed the Zacks Large Cap Pharmaceuticals industry over the past six months (-5.4% vs. +6%). The Zacks analyst believes that Merck’s products like Keytruda, Lynparza and Bridion are driving sales. Keytruda sales are gaining from continued uptake in lung cancer and increasing usage in other cancer indications.
Keytruda has strong growth prospects based on increased utilization, recent approvals for new indications and potential additional approvals worldwide. Animal health and vaccine products remain core growth drivers.
The potential separation into two companies makes strategic sense as the remaining Merck should be able to achieve higher profits than the combined company. However, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise will continue to be overhangs on the top line.
Shares of Novartis have lost -2.6% over the past year against the Zacks Large Cap Pharmaceuticals industry’s rise of +1.9%. The Zacks analyst believes that solid performance of key drugs like Cosentyx and Entresto, and contribution from gene therapy, Zolgensma, have boosted performance in recent times and offset the impact of generic competition for legacy drugs.
Novartis has a strong oncology portfolio and a formidable generics business. New launches like Piqray, Mayzent and Beovu should further boost sales. The biosimilar portfolio also gains traction with new key approvals. Novartis’ decision to restructure its business is a positive and should boost the pharma segment. The deep pipeline is encouraging as well.
However, price erosion in the United States has adversely impacted the generic business. Moreover, pipeline setbacks and generic competition for additional drugs are concerning.
Mondelez’s shares have gained +4.3% over the past three months against the Zacks Food Preparation industry’s fall of -5.6%. The Zacks analyst believes that the company’s focus on brand building through innovation and acquisitions has been yielding results.
Evidently, the buyout of minority stakes in Perfect Snacks along with investments in Hu Master and Uplift Foods, indicates the company's efforts to boost healthy offerings. Also, Mondelez is bolstering presence in the emerging regions.
Notably, management expects organic net revenues to grow more than 3% for 2020. However, adjusted gross margin declined 10 bps due to plant transition hurdles in Brazil, inflation in Argentina and weak powdered beverages in the quarter. Also, it grapples with adverse currency movements.
Other noteworthy reports we are featuring today include ServiceNow (NOW), Deere (DE) and General Dynamics (GD).
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Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>