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Novartis Raises Its 2019 Core Operating Income Guidance

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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.

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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.

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.

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