Analysts’ Recommendations: Most Rate Novartis a ‘Buy’

Novartis's 1Q16 Earnings Got a Neutral Response from Investors

(Continued from Prior Part)

Analysts’ estimates

Novartis (NVS) experienced various changes through acquisitions and divestments over the last two years. Novartis missed analysts’ revenue estimates but beat analysts’ EPS (earnings per share) estimates in 1Q16. It reported an EPS of $1.17—compared to estimates of $1.15. It reported revenue of $11.60 billion—compared to an estimate of $11.79 billion for 1Q16.

Analysts’ estimates show that future revenue will decline by ~2.2% for 2Q16, ~0.3% in 3Q16, and ~0.4% in 4Q16.

Annual estimates

Novartis’s annual estimated EPS for 2016 is $4.82 with a decrease of ~1.0% in annual revenue at $48.95 billion for 2016. The gross margin is expected to improve to 71.9% in 2016. The gross margin is expected to improve due to higher profitability in acquired oncology products and divestment of vaccines and consumer healthcare products that had lower profitability. The operating profit margin is expected to increase to 19.1% in 2016.

Analysts’ recommendations

Novartis’s stock price fell by nearly 23.9% during the last 12 months. Analysts estimate that the stock has the potential to return ~20.6% over next 12 months. Analysts’ recommendations show a 12-month targeted price of $92.25 per share—compared to the last price of $76.48 per share as of April 23, 2016. Also, 57% of analysts recommend a “buy” and 43% recommend a “hold,” according to Bloomberg consensus. It has been observed that changes in analysts’ estimates and recommendations are based on changing trends in the stock price.

Novartis forms about 11.1% of the total assets of the SPDR S&P International Health Care Sector ETF (IRY). GlaxoSmithKline (GSK) forms about 5.4%, Sanofi (SNY) forms about 5.4%, and Novo Nordisk (NVO) forms about 5.9% of IRY’s total assets. Investors can consider ETFs like the First Trust Value Line Dividend ETF (FVD) in order to divest the risk. FVD holds ~0.5% of its total assets in Novartis.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Novartis’s 1Q16 Earnings Got a Neutral Response from Investors

• Part 2 - Novartis Reported Operational Growth in Its 1Q16 Earnings

• Part 3 - Novartis’s Pharmaceutical Revenue Reported Growth in 1Q16