Novartis Stock Down As Q4 Core EPS Miss Estimates; Sees Growth In FY24

(RTTNews) - Shares of Novartis AG were losing more than 4 percent in the morning trading on the Switzerland exchange as well as in pre-market activity on the NYSE after the Swiss drug major's core earnings in the fourth quarter missed market estimates. On a reported basis, net profit surged on hefty income from discontinued operations related to Sandoz Group AG spin-off, as well as higher sales.

Looking ahead for fiscal 2024, the company projects growth in sales and core operating income, and also updated mid-term guidance.

Vas Narasimhan, CEO of Novartis, said, "Our robust operational performance continues, with strong double-digit top and bottom-line growth, for the quarter and full year. We delivered ten positive Ph3 readouts on assets with significant sales potential, over the past year. The very strong performance of our key growth drivers and pipeline underscores the confidence in our growth (5 percent cc CAGR 2023-2028) and margin (40 percent+ by 2027) mid-term guidance."

Further, the Novartis Board of Directors proposed a dividend payment of 3.30 Swiss francs per share for 2023, up 3.1 percent from the prior year. The Board also proposed the re-election of all current members of the Board of Directors, including the Board Chair.

For fiscal 2024, the company projects net sales to grow mid single digit and core operating income to grow high single digit.

Over the mid-term, net sales is expected to grow 5 percent at constant currency rates CAGR 2023-2028 with core operating income margin expanding to around 40 percent by 2027.

In its fourth quarter, net income was $8.48 billion, up from last year's $1.47 billion. Earnings per share were $4.14, significantly higher than $0.69 a year ago.

The latest results included net income from discontinued operations of $5.84 billion following the spin-off of the Sandoz business, compared to income of $151 million in prior year.

The IFRS Accounting Standards non-cash, non-taxable, net gain on distribution of Sandoz Group AG to Novartis AG shareholders was $5.9 billion.

On a continuing operations basis, net income was $2.64 billion, up 101 percent from last year's $1.32 billion. Earnings per share grew 108 percent to $1.29 from $0.62 a year ago.

Core net income was $3.13 billion, compared to last year's $3.25 billion. Core earnings per share were $1.53, compared to $1.52 a year ago. The prior year's core net income from continuing operations was $2.96 billion or $1.39 per share.

Analysts on average expected the company to report earnings of $1.68 per share, according to figures compiled by Thomson Reuters. Analysts' estimates typically exclude special items.

Net sales grew 8 percent to $11.42 billion from last year's $10.58 billion. The Street was looking for sales of $11.75 billion for the quarter. Sales increased 10 percent at constant currency rates, driven by volume growth of 13 percentage points. Generic competition had a negative impact of 3 percentage points and pricing had no impact.

Sales growth was mainly driven by continued strong performance from Entresto, Kisqali, Kesimpta, Cosentyx and Pluvicto.

Emerging Growth Markets generated 18 percent higher sales in constant currency rates. China sales grew 38 percent due to lower prior year base. In Switzerland, Novartis shares were trading at 88.82 francs, down 4.07 percent. In pre-market activity on the NYSE, the shares were at $102.74, down 4.7 percent.

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