Novartis AG's stock fell over 4% in morning trading on the Swiss exchange and pre-market activity on the NYSE after the pharmaceutical giant's core earnings for the fourth quarter failed to meet market expectations. Despite this, the company reported a substantial increase in net profit, largely due to significant gains from discontinued operations following the spin-off of Sandoz Group AG, as well as higher sales.
Looking to the future, Novartis plans for growth in both sales and core operating income in 2024. The CEO of Novartis, Vas Narasimhan, expressed confidence in the company's performance and prospects, noting strong double-digit growth in the upper and lower lines for both the quarter and the year, bolstered by ten positive Phase 3 readouts on assets with high sales potential over the past year.
The board of Novartis has proposed a dividend payment of 3.30 Swiss francs per share for 2023, a 3.1% increase on the previous year. They also proposed the re-election of all current board members, including the board chair.
For 2024, Novartis predicts a mid single-digit growth in net sales and high single-digit growth in core operating income. Over the mid-term, there's an expectation of a 5% growth in net sales at constant currency rates (CAGR 2023-2028), with core operating income margin projected to expand to around 40% by 2027.
The company's net income in the fourth quarter hit $8.48 billion, a significant upturn from the previous year's $1.47 billion. Earnings per share also took a leap, soaring from $0.69 to $4.14.
Fourth quarter results included a net income of $5.84 billion from discontinued operations after the Sandoz spin-off, compared to the previous year's $151 million. Novartis also reported a non-cash, non-taxable, net gain of $5.9 billion on the Sandoz Group AG distribution to shareholders.
When looking at continuing operations, net income rose from last year's $1.32 billion to $2.64 billion, a 101% growth. The company's core net income was $3.13 billion, slightly down from last year's $3.25 billion. However, core earnings per share rose marginally from $1.52 to $1.53.
Despite the positive numbers, analysts had expected Novartis to report earnings of $1.68 per share. Meanwhile, net sales increased by 8% to $11.42 billion, which failed to meet analysts' predictions of $11.75 billion. Sales growth is largely attributed to the strong performances of products like Entresto, Kisqali, Kesimpta, Cosentyx, and Pluvicto.
Emerging growth markets saw an 18% increase in constant currency sales. Sales in China grew by 38% due to a lower base in the prior year. Novartis shares traded at 88.82 francs in Switzerland and $102.74 on the NYSE, down 4.07% and 4.7% respectively.
