Novartis Raises Its 2019 Core Operating Income Guidance

Earnings guidance

In its first-quarter earnings press release, Novartis (NVS) guided for a high-single-digit YoY (year-over-year) core operating income growth rate on a constant currency basis in 2019, higher than its previous growth rate guidance in the mid- to high single digits. This guidance assumes the company’s new organizational structure and excludes any contribution from Alcon’s eye care devices business or Sandoz’s US generic oral solids and dermatology business.

In its first-quarter earnings investor presentation, Novartis guided for a negative core operating income impact of 3%–4% due to foreign exchange movements in 2019 at mid-April exchange rates. In the first quarter, the company reported a negative revenue impact of 9% associated with foreign exchange fluctuations. The company has projected negative core operating income impacts of 5% and 1%, respectively, in the second and third quarters of 2019 but a positive impact of 1% in the fourth quarter due to foreign exchange movements.

Novartis Raises Its 2019 Core Operating Income Guidance

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Wall Street projections

Analysts expect Novartis’s non-GAAP (generally accepted accounting principles) EPS to see YoY rises of 0.17% to $5.16 in 2019, 8.96% to $5.62 in 2020, and 9.13% to $6.13 in 2021.

Analysts expect Novartis’s non-GAAP EPS to see YoY falls of -7.00% to $1.20 in the second quarter, -4.55% to $1.26 in the third quarter, and -4.21% to $1.20 in the fourth quarter of 2019.

Net debt changes and share repurchases

According to the company’s first-quarter earnings press release, at the end of the first quarter, it had net debt of $21.5 billion on its balance sheet, a sequential rise of $5.3 billion mainly due to $6.6 billion worth of annual dividend payments. In 2019, the company plans to complete the $5.0 billion share repurchase program it announced in June 2018.