LONDON, UK / ACCESSWIRE / November 2, 2017 / Pro-Trader Daily has just published a free post-earnings coverage on Novartis AG (NYSE: NVS), which can be viewed by registering at http://protraderdaily.com/optin/'symbol=NVS, following the Company's reporting of its third quarter fiscal 2017 financial results on October 24, 2017. The drug-maker outperformed top- and bottom-line expectations and reported an 18% growth in free cash flow. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member's account at:
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Earnings Reviewed
For the quarter ended September 30, 2017, Novartis reported net sales of $12.41, up 2% compared to sales of $12.13 billion in Q3 2016, as volume growth of 7% was partly offset by the negative impacts of generic competition and pricing. The Company's revenue numbers beat analysts' estimates of $12.2 billion.
During Q3 2017, Novartis' operating income was $2.4 billion, up 4% on a y-o-y basis, primarily driven by growth drivers, productivity, and a gain from a Swiss pension plan amendment, which were partly offset by generic erosion.
Novartis' net income was $2.08 billion for Q3 2017, up 7% compared to $1.95 billion in Q3 2016, driven by the strong operating income and higher income from associated companies. The Company's earnings per share (EPS) jumped 10% on a y-o-y basis for the reported quarter, attributed to growth in net income and the benefits from the share buyback program.
Novartis' core net income was $3.0 billion for Q3 2017, reflecting a growth of 3% on a y-o-y basis, while core EPS was $1.29 for the reported quarter, driven by growth in core net income and the benefits from the share buyback program, coming ahead of Wall Street's earnings expectations of $1.25 per share.
Novartis' free cash flow amounted to $3.1 billion, up 18% on a y-o-y basis compared to $2.6 billion in the prior year's same quarter. The increase of $0.5 billion was mainly driven by improved cash flows from operating activities and lower net investments in intangible assets.
Segment Results
Novartis' Innovative Medicines segment's net sales grew 2% to $8.3 billion. The Company noted that volume contributed 8% to its sales growth, while generic competition had a negative impact of 6%, largely due to Gleevec/Glivec genericization in Europe and the US. The segment's operating income advanced 8% to $2.2 billion, mainly driven by higher sales, productivity, a gain from a Swiss pension plan amendment, and lower amortization.
For Q3 2017, Novartis' Sandoz segment's net sales were $2.6 billion, reflecting a growth of 3% on a y-o-y basis as volume growth of 8% was offset by 7% of price erosion. Net sales across Europe and the rest of the world grew 9% on a constant currency basis (cc), offsetting the decline in the US of 13% cc. The Sandoz segment's operating income jumped 10% on a y-o-y basis, mainly driven by higher sales and strong gross margin expansion.
During Q3 2017, Novartis' Alcon segment's net sales advanced 6% y-o-y, or 7% cc, to $1.5 billion. The segment's surgical sales grew 9% cc, with broad recovery across most market segments, including strong growth from vitreoretinal products. The Alcon segment's results for the reported quarter partly benefited from stock in trade movements, contributing approximately 2% cc of growth.
Alcon's operating loss was $50 million in Q3 2017, in-line with the prior year's comparable quarter, as sales growth was offset by impairments related to business development activities. The segment's core operating income was $238 million, up 16% y-o-y, or 23% cc, driven by higher sales.
Capital structure and net debt
In January 2017, Novartis announced an up to $5 billion share buyback program to be executed on the second trading line. During the first nine months of 2017, the Company repurchased 47.0 million shares for $3.7 billion under this buyback program, and 9.8 million shares for $0.8 billion to mitigate dilution related to equity-based participation plans of associates. Furthermore, Novartis repurchased 2.8 million shares for a total of $0.2 billion from associates, and 12.8 million treasury shares worth $0.7 billion were delivered as a result of options exercised and share deliveries related to participation plans of associates. These treasury share transactions resulted in a net cash outflow of $4.3 billion.
As of September 30, 2017, the Company's net debt increased by $4.7 billion to $20.7 billion compared to December 31, 2016. The increase was mainly driven by the $6.5 billion annual dividend payment, net share repurchases, and M&A related payments, partly offset by $8.0 billion free cash flow in the first nine months of 2017.
2017 Outlook
Novartis re-affirmed its FY17 forecasts. The Company expects group net sales in 2017 to be broadly in-line with the prior year on a constant currency basis, after absorbing the impact of generic competition.
For FY17, the Company is projecting net sales performance for the Innovative Medicines segment to grow slightly on a y-o-y basis. The Sandoz segment's sales were revised downward to broadly in-line with the prior year to a slight decrease, whereas the Alcon segment's sales are expected to report low-single-digit growth. Novartis' group core operating income in 2017 is expected to be broadly in-line with the prior year to a low-single-digit decline on a constant currency basis.
Stock Performance
Novartis' share price finished yesterday's trading session at $82.77, slightly up 0.23%. A total volume of 1.95 million shares have exchanged hands. The Company's stock price surged 6.37% in the past six months and 16.01% in the previous twelve months. Additionally, the stock rallied 13.63% since the start of the year. Shares of the Company have a PE ratio of 29.41 and have a dividend yield of 3.29%. The stock currently has a market cap of $220.47 billion.
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