Novo Nordisk (NVO) Q2 2024 Earnings Surge: A Strong Buy in Diabetes and Obesity Care
Bagsvaerd-based, Denmark-headquartered Novo Nordisk A/S (NVO) focuses on developing, producing, and selling pharmaceuticals in the areas of diabetes treatments, obesity, and rare diseases. Having upped full-year guidance recently, it seems that the company did pretty well in the second quarter of 2024, as it revealed net sales of DKK133.41 billion or $19.72 billion – this number is an increase of 23.9% from last year.
Analysts are bullish about the company, where third-quarter revenue will have year-over-year growth of 31.1% and come in at $10.96 billion, with the company’s EPS for the quarter also estimated to increase 22.3% year over year at $0.87. In addition, NVO also has an excellent earnings surprise history as it has so far topped both the consensus revenue numbers and the EPS numbers for three of the last four quarters.
Novo Nordisk Earnings Analysis: Q2 2024 Highlights and Future Projections
In the present scenario, with a humongous variety of food and paying next to no heed to health conditions, cases of obesity are more than anticipated. Obesity is a huge concern for a vast population, which may cause more than half the diabetes cases and over 200 other chronic diseases. Under this scenario, companies developing anti-obesity drugs will reap exponentially.
By the year 2030, global obesity drugs will go up to 15 times more and will probably increase based on various factors such as demands for treatments in this sector. Based on some analysts at Morningstar and Pitchbook, the market for treatments of obesity can launch 16 new drugs by the year 2029 wherein Novo Nordisk and Eli Lilly will be one of the companies that will play a key role in this market. Obesity Treatment Market is expected to reach CAGR of 10.3% by the year 2032.
With all these trends in the industry, NVO stands to gain from this ever-growing demand for market and consumers. During Q2, NVO reached numerous milestones and accelerated its operations currently underway. Sales of diabetes and Obesity care of the company were at DKK125 billion ($18.48 billion), with a rise of 26% from the previous year because of GLP-1 diabetes growth as well as the growth of Obesity care.
Novo Nordisk concludes the phase 3 FRONTIER 2 study with Mim8, showing better treatment of treated bleeding episodes compared to on-demand and prior prophylaxis treatment in people with haemophilia A. In addition, it has won a positive CHMP opinion, based on the SELECT trial, regarding an update of the Wegovy® label.
The company has also boosted its sales growth forecast for the full-year 2024 to 22% to 28% from a previously guided range of 19% to 27%. It sees an operating profit expansion of 20% to 28% for the same period.
NVO’s shares are up 30.1% over the past year as it closed its last session at $129.78.
10 STOCKS TO SELL NOW!
Now, let’s see the factors which will impact NVO in the near future months.
Recent Positives
July 25, NVO announced that CHMP has adopted a positive opinion for the amendment of the Wegovy® label to include data from the SELECT cardiovascular outcomes trial showing the reduction of major adverse cardiovascular events.
The SELECT trial demonstrated that Wegovy® reduced MACE risk by 20% over placebo when administered adjunctively to usual care. Here’s a significant step forward for all patients with cardiovascular disease and comorbid obesity.
On June 24, NVO announced an investment of $4.1 billion to double US manufacturing capacity by building a second fill and finishing manufacturing facility in Clayton, North Carolina. This will expand the capability of the facility to manufacture current and future injectable treatments for people with obesity and other serious chronic diseases.
Must Read – https://stocknewsguru.com/news/south-koreas-e-commerce-landscape/
Solid Financials
NVO’s net sales increased by 23.9% year-over-year to DKK133.41 billion, or $19.72 billion, for the six months that ended June 30, 2024. Gross profit increased by 23.6% from the year-ago value to DKK113.22 billion, or $16.73 billion. The EBIT of DKK57.78 billion, or $8.54 billion, shows growth of 18.2% from the prior year’s quarter.
The company’s net profit and EPS were DKK 45.46 billion ($6.72 billion) and DKK 10.17, respectively, up 15.8% and 16.8% year over year. EBITDA improved 31.7% from the year-ago value to DKK 69.54 billion ($10.28 billion).
Free cash flow and total assets for the company, on June 30, 2024, were DKK 41.31 billion ($6.11 billion) and DKK 369.38 billion ($54.60 billion), respectively.
Good historical growth
NVO’s revenues and EBITDA have increased at CAGRs of 25.7% and 29.3% for the past three years. The net income and EPS in the meantime has increased by a respective 26.6% and 28.1% while EBIT has increased 29.9%.
Total assets for the company have increased with a respective CAGR of 32.7% while the total levered free cash flows have increased 35.2% over the same period.
Positive Analysts Projections
The third-quarter revenues saw a growth of 31.1% year over year to $10.96 billion in revenues. In that respect, the EPS would come at $0.87 for the third quarter, showing a year-over-year increase of 22.3%. Meanwhile, the company has an excellent track record in earnings surprise history with having outperformed the consensus revenue and EPS estimates in three of the last four quarters.
For the fiscal year ending December 2024, NVO’s revenue and EPS are expected to grow 27.3% and 25.4% year over year to $42.87 billion and $3.38, respectively. Street also expects the company’s revenue and EPS for fiscal year 2025 to increase 20.3% and 26% year over year to $51.57 billion and $4.26, respectively.
High Profitability
NVO has 47.2% and 1640.2% higher gross profit margin and EBIT margin, which come in at 84.53% and 45.96%, respectively, compared with the respective industry averages of 57.44% and 2.64%. Its trailing-12-month levered FCF margin stands at 21.12%, a significantly better number than the industry average of 1.32%.
Furthermore, compared to an industry average of 3.30%, the trailing-12-month CAPEX/Sales of 13.25% stands favorably. Its Asset Turnover Ratio for the trailing-12-month stands at 0.79x which is about 92.2% higher than the industry average of 0.41x.
POWR Ratings Reflect Promise
Its POWR Ratings reflect NVO’s strong fundamentals. That means it has a B in our rating system, which translates to a Buy. The POWR Ratings take into account 118 unique factors of each stock and are weighted optimally.
Our proprietary rating system also evaluates each stock based on eight distinct categories. NVO has an A grade for Quality, consistent with its higher-than-industry profitability.
It ranks #26 in the Medical – Pharmaceuticals industry with 160 stocks in the Equity Scope Benchmarks 160-stock All Cap Total US Equity Scope Index.
Apart from the above, it is also available that we have given the ratings for Sentiment, Value, Momentum, Growth, and Stability to NVO. Find out all the NVO ratings here .
NVO is a front-line pharmaceutical company with an operation system in many countries, offering solutions in segments of Diabetes and Obesity Care, as well as Rare Disease. Expansion through the manufacturing by the recent medicinal breakthrough by the company has opened other avenues to reach out to the global market.
As analyst expectations keep turning on the bright side, this medical stock will appear to be the perfect buy to pursue for growth opportunities considering NVO’s strong financial performance, accelerating profitability, and good analyst expectation.
How Does Nordisk A/S (NVO) Compare to Its Competition?
Even though NVO carries an overall POWR Rating of B, investors might also want to consider the other stocks in the same Medical – Pharmaceuticals industry that have a grade of A (Strong Buy) or B (Buy) rating: GSK PLC ADR (GSK), AbbVie Inc. (ABBV), and Merck & Co. Inc. (MRK).
NVO trades at $0.23 (+0.17%) in its after-hours trading Thursday. Year to date, NVO is up 33.13% as compared to the 18.37% climb in the benchmark S&P 500 index over the same period.