Financial performance in 2016
In 2016, Novartis (NVS) reported revenues of $48.4 billion, a flat year-over-year (or YoY) performance on a constant currency basis. The company maintained its revenues despite falling revenues from its top-selling oncology drug, Glivec, as well as other patent expiries. The negative impact of these headwinds on revenues has been close to $2.4 billion. Thus, Novartis’s flat revenue performance has exhibited the growth potential of the company’s product portfolio, which could completely offset the $2.4 billion revenue hit in 2016.
The patent expiries coupled with investments the company made adversely affected Novartis’s core operating income by 2% on a YoY basis. However, free cash flow rose 2% to reach $9.5 billion in 2016.
If Novartis manages to continue its solid financial performance in 2017, it could have a positive impact on share prices of the company as well as those of the Vanguard Total International Stock ETF (VXUS). Novartis makes up about 0.76% of VXUS’s total portfolio holdings.
Analyst recommendations for Novartis
Of the five analysts covering Novartis (NVS) in March 2017, two have rated the company a “strong buy,” one has rated it a “buy,” and two have rated it as a “hold.” None of the analysts have rated Novartis as a “sell.” 60% of analysts covering the company have given it some form of “buy” recommendation.
Of the 22 analysts covering Pfizer (PFE) in March 2017, ~50% have rated the company as a “buy.” Approximately 43% of the 23 analysts covering Bristol-Myers Squibb (BMY) have given it “buy” recommendations. Approximately 77% of the 22 analysts covering Eli Lilly (LLY) have rated the company as a “buy.”
In the next article, we’ll discuss revenue projections for Novartis in greater detail.