Novartis Reports Lower Q4 Profit Despite Sales Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4d ago
0mins
Should l Buy NVS?
Source: NASDAQ.COM
- Profit Decline: Novartis reported a 15% drop in net income for Q4, totaling $2.40 billion, despite sales growth, indicating pressure on profitability amid market challenges.
- Earnings Per Share Drop: The earnings per share fell to $1.26, an 11% decrease year-over-year, reflecting challenges in cost management and competitive pressures in the pharmaceutical sector.
- Sales Growth Weakness: Net sales increased by 1% to $13.34 billion, but decreased by 1% at constant currency rates, primarily impacted by US generic erosion, highlighting vulnerabilities in revenue streams.
- Dividend Increase and Outlook: The company proposed a dividend of 3.70 Swiss francs per share, a 5.7% increase from last year, while projecting low single-digit growth in net sales and a decline in core operating income for fiscal 2026, indicating uncertainty in future performance.
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Analyst Views on NVS
Wall Street analysts forecast NVS stock price to fall over the next 12 months. According to Wall Street analysts, the average 1-year price target for NVS is 127.75 USD with a low forecast of 112.00 USD and a high forecast of 143.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
6 Analyst Rating
1 Buy
4 Hold
1 Sell
Hold
Current: 153.950
Low
112.00
Averages
127.75
High
143.00
Current: 153.950
Low
112.00
Averages
127.75
High
143.00
About NVS
Novartis AG is a Switzerland-based pharmaceutical company. The Company develops, manufactures, and markets branded and generic prescription drugs, active pharmaceutical ingredients (APIs), biosimilars and ophthalmic products. The Company uses science and digital technologies for treatments in the disease areas of immunology, dermatology, cancer, ophthalmology, neuroscience, respiratory, cardiovascular, renal and metabolism. The business activities of the Company are divided into two segments: Innovative Medicines, which includes innovative patent-protected prescription medicines for blood pressure, cancer and other ailments, and Sandoz, which includes generic pharmaceuticals and biosimilars.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Core Operating Income Slightly Up: Core operating income rose 1% to $4.93 billion, benefiting from increased government grant income and reduced SG&A expenses, although higher R&D costs partially offset these gains, resulting in a core operating income margin of 37.0%.
- Strong Performance from Blockbusters: Demand for blockbuster therapies like Kisqali and Kesimpta surged by 44% and 27% respectively, driving overall performance and demonstrating Novartis's competitive strength in oncology and multiple sclerosis markets.
- Cautiously Optimistic Outlook: Novartis expects low single-digit growth in net sales for 2026, while core operating income may decline slightly; however, the incoming CFO indicated that operating income is set to grow significantly in the second half of the year, suggesting strong potential for future growth.
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- Sales and Revenue: Net sales decreased by 1% year-over-year, with a 1% increase in USD terms when excluding currency effects, suggesting that while the company maintains some revenue levels amid market challenges, core operating income growth of only 1% indicates pressure on profitability.
- Cash Flow Situation: Free cash flow amounted to $1.7 billion, down 54% year-over-year, primarily driven by lower cash flows from operating activities, which may impact the company's reinvestment capabilities and shareholder return strategies.
- Future Outlook: Novartis expects low single-digit growth in net sales and a slight decline in core operating income for 2026; despite facing the largest patent expiry in its history, the company remains optimistic about its mid-term guidance, emphasizing the resilience and ongoing growth potential of its business.
See More
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- Market Reaction: Despite the dividend increase, Novartis faces a rating downgrade, leading to cautious market expectations regarding future growth, which may impact investor confidence and stock performance.
- Outlook Challenges: Novartis anticipates a transition year in 2026, with a soft outlook for FY26, highlighting the challenges the company faces in strategic adjustments and market adaptation.
See More
