Novartis stock broke out Tuesday after the Big Pharma stalwart put up its best profit growth in two years and raised its sales outlook for the year.
During the June quarter, Novartis' core earnings jumped 17.3% to $1.83 per share, beating estimates for $1.73, according to FactSet. That was the company's best earnings growth since June 2021, when core profit surged more than 22%. Excluding the impact of exchange rates, Novartis profit jumped 25%.
Sales also climbed 7% on a strict, as-reported basis to $13.62 billion. In constant currency, sales surged 9% higher. Analysts expected $13.47 billion in sales.
The company also announced plans to repurchase $15 billion in stock by the end of 2025.
"We were expecting a solid quarter based on recent sales momentum we have seen with products such as Kisqali, but this exceeded our expectations," Edward Jones analyst John Boylan said in a note to clients. "The stock repurchase announcement was also a pleasant surprise."
On the stock market today, Novartis stock popped 4.6%, closing at 103.46. Shares broke out of a double bottom base with a buy point at 102.73, according to MarketSmith.com.
Novartis Stock: Innovative Medicines Drive Growth
Novartis splits its business into two divisions. Its innovative medicines business brought in $11.2 billion in sales, growing 7% on a strict, as-reported basis. Excluding exchange rates, sales popped 9%. The Sandoz business, which sells generic drugs, generated $2.4 billion, up 5%. Novartis is planning to spin Sandoz into its own company in the fourth quarter.
The company called out strong second-quarter performance from heart failure drug Entresto, multiple sclerosis medicine Kesimpta and cancer drugs Kisqali and Pluvicto. Partially offsetting their strength, another multiple sclerosis treatment called Gilenya is now facing generic competition.
Edward Jones' Boylan also noted Novartis is battling a recent patent ruling in the U.S. against Entresto.
This "remains an overhang on the shares, although the company is appealing the decision," he said.
In its Sandoz business, Novartis noted strength from Europe driven by recent launches, a strong cough and cold season, and biosimilars. Biosimilars are low-cost knockoffs of branded biologic drugs. Global sales of biosimilars soared 12% to $531 million, or 13% in constant currency.
Novartis Boosts Sales, Income View
For the year, Novartis now expects sales to increase by a high single-digit percentage, up from its previous view for a mid single-digit jump. Core operating income — a measure of profitability — is expected to grow a low double-digit percentage, up from Novartis' earlier prediction for a high single-digit increase.
Novartis stock analysts forecast earnings of $6.72 a share and $53.56 billion in sales.
"Novartis seems to be executing on its business plan better than we expected, and it is managing costs well," Boylan said.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
