Novartis: Here’s What Impacted 2Q17 Earnings and Missed Estimates



A look at Novartis’s 2Q17 earnings

Novartis (NVS) released its 2Q17 earnings on July 18, 2017. It reported flat revenues at constant exchange rates compared to 2Q16. It also missed Wall Street analysts’ revenue estimate with reported revenues of $12.24 billion against the estimate of $12.27 billion. However, the company surpassed estimates for EPS (earnings per share), reporting $1.22 against the estimate of $1.18.

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The above graph shows the comparison of revenues and EPS over the last few quarters.

NVS stock performance

On July 18, 2017, Novartis stock rose ~1.8% to close at $84.77. The previous day’s closing price was $83.27. The stock also rose the next day to close at $85.03 due to investors’ positive response to the 2Q17 earnings release. Overall, Novartis stock has risen nearly 2.9% in the last 12 months and nearly 17.3% year-to-date.

2Q17 performance

In 2Q17, Novartis’s top line fell 2.0% to $12.24 billion, driven by flat operating revenues and a 2.0% negative impact of foreign exchange. At constant exchange rates, revenues for its Innovative Medicines segment rose 1.0%, while revenues for Alcon, its eye care segment, rose 3.0%. Sandoz, its generic pharmaceuticals segment, reported a 4.0% fall in 2Q17 revenues at constant exchange rates.

The company reported a volume growth of 6.0%, excluding the generics segment, in 2Q17. It was partially offset by the 3.0% negative impact of generics and the 3.0% pricing issues due to competition. Foreign exchange had a negative impact of 2.0% on total revenues.

To divest the risk, you can consider the Vanguard FTSE Developed Markets ETF (VEA), which holds 1.0% of its total assets in Novartis. VEA also holds 1.0% in GlaxoSmithKline (GSK), 0.50% in Sanofi (SNY), and 0.40% in Novo Nordisk (NVO).


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