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Novartis’s 1Q16 Earnings Got a Neutral Response from Investors

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Novartis’s 1Q16 earnings

Novartis (NVS) released its 1Q16 earnings on April 21, 2016. It reported top-line growth of 1% at constant exchange rates for 1Q16—compared to 1Q15. The company reported an EPS (earnings per share) of $1.17—compared to Wall Street analysts’ estimates of $1.15 for 1Q16. To learn more about the company, read Novartis: Investor Insights into a Pharmaceutical Multinational.

Novartis’s stock price fell by ~0.4% and closed at $76.28 on April 21, 2016—compared to the previous day’s close of $76.59. This shows a neutral response towards the earnings release.

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Stock performance 

Novartis’s stock has fallen by over 24% in the last 12 months. Its competitors like Pfizer (PFE) and GlaxoSmithKline (GSK) fell by 2.6% and 0.1%, respectively, during the same period. Merck & Co. (MRK) rose by 2% over the last 12 months. The iShares US Pharmaceuticals ETF (IHE) fell by ~15.6%. Overall, the returns have been negative due to various economic factors impacting the global markets. For an earnings review of other companies, visit Market Realist’s Pharmaceutical Earnings Overview page.

1Q16 performance

Novartis’s top line fell by ~3% to $11.6 billion in 1Q16. It was driven by operational growth of ~1% in revenue. It was more than offset by a currency impact of -4%. At constant exchange rates, Novartis’s pharmaceutical segment’s revenue increased by 1%. Alcon is in the eye care business. Its revenue fell by 3% during 1Q16. Sandoz is Novartis’s generics pharmaceuticals business. It reported 4% growth in its 1Q16 revenue at constant exchange rates.

The major reasons behind the declining revenue include the adjustments for changes in the product portfolio including the acquisition of GlaxoSmithKline’s (GSK) oncology business and the divestiture of its Vaccines and Consumer Healthcare divisions to GlaxoSmithKline in March 2015. Also, Alcon’s poor performance due to competition in surgical care and contact lens products substantially offset Novartis’s growth during the quarter.

Investors can also consider ETFs like the PowerShares International Dividend Achievers ETF (PID) in order to divest risk. PID holds 2.3% of its total assets in Novartis.

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