Novo Impressed Wall Street with Its 1Q16 Earnings

Novo Nordisk (NVO) reported its 1Q16 earnings on April 29, 2016. It reported sales amounting to ~27.2 billion Danish krone for the quarter. Wall Street analysts were expecting it to record ~27.1 billion krone during the period.

Novo surprised analysts by reporting 0.3% higher revenue. Its revenue during the period rose by ~8% on a YoY (year-over-year) basis.

The pillars for Novo’s sales growth were Victoza, Norditropin, Levemir, and Tresiba. NVO’s US sales rose by 14% on a reported basis. US sales remained the main driver of the company’s revenue, with 3% growth flowing from “non-recurring adjustments to rebates in the Medicaid patient segment.”

In 1Q16, Victoza’s sales rose by 16%, whereas Tresiba’s and Levemir’s sales rose by 113% and 8%, respectively, on a reporting basis.

Novo’s 8% sales growth in 1Q16 outpaced its peers’ performance numbers. Let’s have a look at how much growth these peers recorded.

Eli Lilly’s (LLY) sales rose by 4.7% in 1Q16, whereas Sanofi (SNY) reported a 0.7% rise in sales in the quarter on a constant currency basis. Merck & Co. (MRK) is expected to witness a 0.2% rise in revenue in its 1Q16 earnings.

During 1Q16, Novo reported diluted earnings per share (or EPS) of ~3.7 krone. Wall Street expected its earnings to be ~3.6 krone. After adjusting for non-recurring elements, NVO’s EPS in 1Q16 was 23% higher than its 1Q15 EPS.

NVO’s share price is quite sensitive to events such as earnings releases, performance with respect to expectations, and other macro-economic factors. To avoid the direct risk associated with the equity, investors can opt for the VanEck Vectors Pharmaceutical ETF (PPH). Novo Nordisk accounts for 5.0% of PPH’s total holdings.

In the next article, we’ll see how Novo’s share price has performed.