Novartis (NVS) has undergone various changes through acquisitions and divestments over the past two years. Novartis surpassed analyst estimates for EPS (earnings per share) and revenues in 2Q16, reporting EPS of $1.23, as compared to an estimated $1.19, and revenues of $12.5 billion, as compared to an estimated $12.2 billion for 2Q16.
Analyst estimates also show that future revenues will decline by ~1.0 in 3Q16 and by ~0.2% in 4Q16.
Novartis’s annual estimated EPS for 2016 came in at $4.80, with a decrease of ~1.5% in annual revenues at ~$48.7 billion. The company’s gross margin is expected to improve to 73.1% in 2016, as compared to 65.4% in 2015, due to higher profitability in acquired oncology products, and the divestment of the vaccines and consumer healthcare products businesses, which had lower profitability.
The company’s net profit margin is expected to increase to 23.4% in 2016, as compared to 17.2% in 2015.
Novartis’s stock price has decreased by nearly 20.3% during the last 12 months. Analysts estimate the stock has a potential to return ~15.3% over the next 12 months.
Analyst recommendations show a 12-month targeted price of $94.00 per share, as compared to the last price of $81.53 per share on July 19, 2016. Specifically, 57% of analysts recommend a “buy,” while 43% recommend a “hold,” according to the latest Bloomberg consensus. (Remember, changes in analyst estimates and recommendations are based on changing trends in stock price.)
Novartis makes up about 11.1% of total assets of the SPDR S&P International Health Care Sector ETF (IRY), while GlaxoSmithKline (GSK) makes up about 5.4% of the total assets of IRY. Peers Sanofi (SNY) and Novo Nordisk (NVO) make up about 5.4% and 6.0%, respectively, of IRY.
To divest risk, investors can also consider ETFs like the First Trust Value Line Dividend ETF (FVD), which has ~0.5% of its total assets in Novartis.