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Should You Invest in Novo Nordisk (NVO) Ahead of Q2 Earnings?
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Novo Nordisk (NVO - Free Report) is slated to report second-quarter 2024 results on Aug 7, before the opening bell. The Zacks Consensus Estimate for quarterly revenues in the to-be-reported quarter is pegged at $9.91 billion, while the same for earnings is pinned at 76 cents per share.
In the past 30 days, the estimates for Novo Nordisk’s 2024 earnings per share (EPS) deteriorated from $3.41 to $3.38. During the same time frame, the forecast for the company’s 2025 EPS has improved from $4.30 to $4.35.
Image Source: Zacks Investment Research
Earnings Surprise History
NVO’s performance has been mixed over the trailing four quarters, with earnings beating estimates in three quarters and missing the mark once. On average, Novo Nordisk registered an earnings surprise of 3.80% in the last four quarters. In the last reported quarter, the company came up with an earnings surprise of 7.79%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not predict an earnings beat for Novo Nordisk this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
NVO operates under two segments — Diabetes and Obesity Care and Rare disease.
Revenue growth in second-quarter 2024 is expected to have been driven by the strong demand for NVO’s diabetes and obesity care medicines, especially semaglutide. Notably, semaglutide, a GLP-1 agonist, is approved as an Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes (T2D) and as a Wegovy injection for weight management.
Wegovy is likely to have been the key top-line contributor for Novo Nordisk in the second quarter on the back of strong prescription trends. The drug has been generating impressive revenues and profits.
Earlier this year, Wegovy was approved by the FDA for reducing the risk of serious heart problems in obese/overweight adults. The expanded use of the blockbuster weight management drug has likely boosted its sales in the said quarter by increasing the eligible patient population. A regulatory filing for Wegovy to treat this indication is also under review in the EU.
Ozempic sales have likely increased in the to-be-reported quarter as well based on the trend witnessed in the past few quarters, fueled by rising demand. Quarterly revenues from sales of Rybelsus and fast-acting insulin, Fiasp, are likely to have put up a strong performance in second-quarter 2024, contributing to the top line.
Novo Nordisk’s revenues under the Rare Disease segment are likely to have declined in the to-be-reported quarter, mainly due to low sales of its hemophilia A products. However, sales of hemophilia B products are expected to have increased year over year.
Investors can also expect updates on Novo Nordisk’s ongoing clinical studies on semaglutide for additional indications. The company is evaluating Wegovy’s efficacy in phase III studies for treating heart failure with preserved ejection fraction in diabetes and obesity patients. The company is also looking to expand Ozempic’s indication as an adjunctive treatment to prevent the progression of renal impairment in T2D and chronic kidney disease patients.
A separate phase III study evaluating semaglutide for nonalcoholic steatohepatitis is also currently underway.
NVO’s blockbuster portfolio of drugs coupled with strong pipeline progress, indicates that a single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell, or hold this stock.
Price Performance & Valuation
Year to date, the stock has surged 23.6% against the industry’s rise of 20.1%. During the same time frame, the stock also outperformed the sector and the S&P 500.
NVO Stock Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
Novo Nordisk is trading at a premium to the industry. Going by the price/earnings ratio, the company shares currently trade at 32.56 forward earnings, higher than 19.86 for the industry. The stock is more expensive than most other large drugmakers.
NVO Valuation
Image Source: Zacks Investment Research
Investment Thesis
NVO is the global market leader in the GLP-1 segment with around 54% value market share. The company has been witnessing strong sales trends for its semaglutide medicines. The increasing demand for Wegovy and Ozempic has been significantly contributing to the topline. It is also looking to expand the indications for these drugs to increase the eligible patient population. Subject to approval for such indications, revenues generated from their sales will further boost the top line.
The company faces strong competition from Eli Lilly (LLY - Free Report) in the obesity market space. Lilly has seen unparalleled success with tirzepatide, a dual GIP and GLP-1 receptor agonist, marketed as Mounjaro for T2D and Zepbound for obesity.
Both NVO’s and Lilly’s share prices slid once last week after Roche (RHHBY - Free Report) announced encouraging phase I study data for its new oral obesity drug candidate, CT-996, acquired through Carmot Therapeutics.
The stocks again experienced a fall yesterday following Viking Therapeutics’ (VKTX - Free Report) announcement regarding plans for advancing its lead candidate, VK2735 (subcutaneous), into phase III development for obesity. The company is also developing VK2735 as an oral pill in an early-stage study.
Despite rising competition, the obesity sector represents a huge untapped market opportunity. Per research conducted by Goldman Sachs, the obesity market in the United States is expected to reach $130 billion by 2030. To capitalize on such an opportunity, Novo Nordisk is investing heavily to optimize its production capacities while also evaluating some other novel obesity candidates in its pipeline.
Conclusion
Based on the above discussion, we can conclude that NVO is a good stock to retain, no matter how the second-quarter results pan out and the stock’s reaction to the results. Growing market share and profit margins suggest that the company has the potential for further growth in the years to come, primarily driven by increased sales of Wegovy and Ozempic.
Consistently rising earnings estimates highlight analysts’ optimistic outlook for further growth. Though NVO currently trades at a premium to the industry, any major dip in the stock’s price can be used as an opportunity to buy it for long-term gains.
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Should You Invest in Novo Nordisk (NVO) Ahead of Q2 Earnings?
Novo Nordisk (NVO - Free Report) is slated to report second-quarter 2024 results on Aug 7, before the opening bell. The Zacks Consensus Estimate for quarterly revenues in the to-be-reported quarter is pegged at $9.91 billion, while the same for earnings is pinned at 76 cents per share.
In the past 30 days, the estimates for Novo Nordisk’s 2024 earnings per share (EPS) deteriorated from $3.41 to $3.38. During the same time frame, the forecast for the company’s 2025 EPS has improved from $4.30 to $4.35.
Earnings Surprise History
NVO’s performance has been mixed over the trailing four quarters, with earnings beating estimates in three quarters and missing the mark once. On average, Novo Nordisk registered an earnings surprise of 3.80% in the last four quarters. In the last reported quarter, the company came up with an earnings surprise of 7.79%.
Earnings Whispers
Our proven model does not predict an earnings beat for Novo Nordisk this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Novo Nordisk has an Earnings ESP of -3.76% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Factors Shaping Upcoming Results
NVO operates under two segments — Diabetes and Obesity Care and Rare disease.
Revenue growth in second-quarter 2024 is expected to have been driven by the strong demand for NVO’s diabetes and obesity care medicines, especially semaglutide. Notably, semaglutide, a GLP-1 agonist, is approved as an Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes (T2D) and as a Wegovy injection for weight management.
Wegovy is likely to have been the key top-line contributor for Novo Nordisk in the second quarter on the back of strong prescription trends. The drug has been generating impressive revenues and profits.
Earlier this year, Wegovy was approved by the FDA for reducing the risk of serious heart problems in obese/overweight adults. The expanded use of the blockbuster weight management drug has likely boosted its sales in the said quarter by increasing the eligible patient population. A regulatory filing for Wegovy to treat this indication is also under review in the EU.
Ozempic sales have likely increased in the to-be-reported quarter as well based on the trend witnessed in the past few quarters, fueled by rising demand. Quarterly revenues from sales of Rybelsus and fast-acting insulin, Fiasp, are likely to have put up a strong performance in second-quarter 2024, contributing to the top line.
Novo Nordisk’s revenues under the Rare Disease segment are likely to have declined in the to-be-reported quarter, mainly due to low sales of its hemophilia A products. However, sales of hemophilia B products are expected to have increased year over year.
Investors can also expect updates on Novo Nordisk’s ongoing clinical studies on semaglutide for additional indications. The company is evaluating Wegovy’s efficacy in phase III studies for treating heart failure with preserved ejection fraction in diabetes and obesity patients. The company is also looking to expand Ozempic’s indication as an adjunctive treatment to prevent the progression of renal impairment in T2D and chronic kidney disease patients.
A separate phase III study evaluating semaglutide for nonalcoholic steatohepatitis is also currently underway.
NVO’s blockbuster portfolio of drugs coupled with strong pipeline progress, indicates that a single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell, or hold this stock.
Price Performance & Valuation
Year to date, the stock has surged 23.6% against the industry’s rise of 20.1%. During the same time frame, the stock also outperformed the sector and the S&P 500.
NVO Stock Outperforms Industry, Sector & S&P 500
Novo Nordisk is trading at a premium to the industry. Going by the price/earnings ratio, the company shares currently trade at 32.56 forward earnings, higher than 19.86 for the industry. The stock is more expensive than most other large drugmakers.
NVO Valuation
Investment Thesis
NVO is the global market leader in the GLP-1 segment with around 54% value market share. The company has been witnessing strong sales trends for its semaglutide medicines. The increasing demand for Wegovy and Ozempic has been significantly contributing to the topline. It is also looking to expand the indications for these drugs to increase the eligible patient population. Subject to approval for such indications, revenues generated from their sales will further boost the top line.
The company faces strong competition from Eli Lilly (LLY - Free Report) in the obesity market space. Lilly has seen unparalleled success with tirzepatide, a dual GIP and GLP-1 receptor agonist, marketed as Mounjaro for T2D and Zepbound for obesity.
Both NVO’s and Lilly’s share prices slid once last week after Roche (RHHBY - Free Report) announced encouraging phase I study data for its new oral obesity drug candidate, CT-996, acquired through Carmot Therapeutics.
The stocks again experienced a fall yesterday following Viking Therapeutics’ (VKTX - Free Report) announcement regarding plans for advancing its lead candidate, VK2735 (subcutaneous), into phase III development for obesity. The company is also developing VK2735 as an oral pill in an early-stage study.
Despite rising competition, the obesity sector represents a huge untapped market opportunity. Per research conducted by Goldman Sachs, the obesity market in the United States is expected to reach $130 billion by 2030. To capitalize on such an opportunity, Novo Nordisk is investing heavily to optimize its production capacities while also evaluating some other novel obesity candidates in its pipeline.
Conclusion
Based on the above discussion, we can conclude that NVO is a good stock to retain, no matter how the second-quarter results pan out and the stock’s reaction to the results. Growing market share and profit margins suggest that the company has the potential for further growth in the years to come, primarily driven by increased sales of Wegovy and Ozempic.
Consistently rising earnings estimates highlight analysts’ optimistic outlook for further growth. Though NVO currently trades at a premium to the industry, any major dip in the stock’s price can be used as an opportunity to buy it for long-term gains.