Advertisement
U.S. markets open in 9 hours 1 minute
  • S&P Futures

    5,210.50
    -4.25 (-0.08%)
     
  • Dow Futures

    39,220.00
    -3.00 (-0.01%)
     
  • Nasdaq Futures

    18,190.75
    -40.75 (-0.22%)
     
  • Russell 2000 Futures

    2,049.70
    -0.10 (-0.00%)
     
  • Crude Oil

    82.72
    0.00 (0.00%)
     
  • Gold

    2,164.90
    +0.60 (+0.03%)
     
  • Silver

    25.34
    +0.08 (+0.32%)
     
  • EUR/USD

    1.0875
    -0.0001 (-0.01%)
     
  • 10-Yr Bond

    4.3400
    -4.3400 (-100.00%)
     
  • Vix

    14.33
    -0.08 (-0.56%)
     
  • dólar/libra

    1.2719
    -0.0009 (-0.07%)
     
  • USD/JPY

    149.8780
    +0.7800 (+0.52%)
     
  • Bitcoin USD

    65,421.05
    -2,503.68 (-3.69%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,722.55
    -4.87 (-0.06%)
     
  • Nikkei 225

    39,751.09
    +10.69 (+0.03%)
     

Will Novartis' (NVS) Earnings Disappoint Expectations in Q4? - Analyst Blog

Switzerland-based Novartis AG (NVS), one of the leading players in the healthcare solutions, will be reporting its fourth-quarter and full-year 2014 results on Jan 27, 2015.

Novartis’ track record remained dismal in the first nine months of 2014 with the company missing estimates twice in the last three quarters. The average earnings miss over the last four quarters is 0.98%.

Factors Influencing This Quarter

The key drugs at Novartis – Gilenya, Afinitor, Tasigna, Galvus, Lucentis, Xolair, the chronic obstructive pulmonary disease portfolio and Jakavi – contribute substantially to sales. However, generic competition for Diovan Mono in the U.S. (launched in Jul 2014), continued decline of Diovan monotherapy in Japan (generic entry in Jun 2014), biennial price cut of many brands and impact of issues related to investigator-initiated trials are negatively impacting the top line and will continue to do so in the fourth quarter.

Novartis expects sales to increase from low-to-mid single digits in 2014. Currency fluctuations are likely to negatively impact annual sales by 2%. We are concerned about the loss of patent protection for some of the key drugs in Novartis’ portfolio. Its blockbuster drug, Diovan, had lost exclusivity in the EU in Nov 2011 and generics have already been launched. The drug had also lost patent protection in the U.S. in Sep 2012.

Generics are projected to impact sales by $2.5 billion in 2014. Exforge is also facing generic competition in the U.S. Loss of patent protection for these drugs will adversely impact sales in the fourth quarter.

Novartis undertook an initiative to reorganize of its portfolio in 2014. The company entered into an agreement with GlaxoSmithKline (GSK) in Apr 2014 to divest its vaccines business (excluding flu) to Glaxo. In exchange, Novartis would acquire Glaxo’s oncology products. Novartis also divested its blood transfusion diagnostics unit to Grifols S.A. in Jan 2014 and the animal health division in Jan 2015. Although margins are expected to improve, it is still too early to gauge the impact of the reorganization.

What Our Model Indicates

Our proven model does not conclusively show that Novartis is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. Unfortunately, this is not the case as you will see below.

Zacks ESP: The Earnings ESP for Novartis is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate both stand at $1.13 per share.

Zacks Rank: Novartis carries a Zacks Rank #4 (Sell), which when combined with a 0.00% ESP makes an earnings beat unlikely.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Pfizer (PFE) has an Earnings ESP of +1.89% and carries a Zacks Rank #3. It is scheduled to report results on Jan 27.

Biodel Inc. (BIOD) has an Earnings ESP of +33.33% and carries a Zacks Rank #1. The company is scheduled to release fiscal first-quarter results on Feb 5.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
NOVARTIS AG-ADR (NVS): Free Stock Analysis Report
 
PFIZER INC (PFE): Free Stock Analysis Report
 
BIODEL INC (BIOD): Free Stock Analysis Report
 
GLAXOSMITHKLINE (GSK): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Advertisement