Sector Update: Health Care Stocks Softer Late Afternoon

On Tuesday, Novartis AG reported third-quarter sales of $12.823 billion, up 9% (+10% on constant currency), beating the consensus of $12.76 billion.

Guidance: Novartis also raised its 2024 full-year guidance again this year.

In a statement, Novartis said it expects full-year core operating income to grow by a “high teens” percentage, compared with previous guidance of a “mid-to-high teens” percentage.

Novartis forecasts full-year sales growth in the low double digits, having previously guided for high-single to low-double-digit growth.

Pelabresib filing was further delayed, triggering a $800 million impairment charge related to the $2.9 billion acquisition of MorphoSys.

Earlier this year, MorphoSys faced a burgeoning safety concern surrounding pelabresib.

Goldman Sachs notes that MorphoSys-related impairment charge is somewhat underwhelming, raising doubts about the company’s M&A strategy.

Truist notes that Novartis is concentrating on preparing the market for the PSMAFore label, which is expected to triple its addressable market.

They also pointed out that growth opportunities in China and Japan, and metastatic hormone-sensitive prostate cancer (mHSPC) and oligometastatic disease, could push Pluvicto’s sales well above the projected $2 billion peak.

The company is committed to maximizing the potential of Pluvicto and its radioligand therapy (RLT) portfolio.

For other radiopharmaceutical companies targeting PSMA, entering this market may become more challenging.

A crucial question remains regarding the standards that must be met to compete with more effective radioligand products. This context relates to companies such as Eli Lilly And Co and Bristol Myers Squibb & Co , which have RLT products in their pipelines, as well as smaller companies, including Y-mAbs Therapeutics Inc and Perspective Therapeutics Inc .

Novartis highlighted continued strong growth and momentum and sees room to grow the market size for B-cell inhibition in multiple sclerosis, relating Biogen Inc .

Truist highlights Novartis’ strong balance sheet, which enables further bolt-on deals and share buybacks. Recent transactions primarily involve deals in the sub-$1 billion range, along with a few larger bolt-on acquisitions.

A Truist analyst indicated that they will be monitoring how the adoption of Leqvio may affect Amgen Inc‘s Repatha and Regeneron Pharmaceuticals Inc‘s Praluent. Meanwhile, Novartis has reported that the launch is advancing smoothly, and Leqvio continues to grow, outpacing the overall market as per the management.

Novartis’ Cosentyx witnessed strong uptake and continued brand growth driven by hidradenitis suppurativa expansion, and the market opportunity can accommodate several players, Abbvie Inc , Incyte Corporation , and Kymera Therapeutics, Inc. .

Price Action: NVS stock is down 0.48% at $110.00 at last check Wednesday.

Photo by Taljat David via Shutterstock

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For Immediate Release

Chicago, IL – September 11, 2024 – Zacks.com announces the list of stocks and featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Visa Inc. V, AbbVie Inc. ABBV, Anheuser-Busch InBev SA/NV BUD, Servotronics, Inc. SVT and United-Guardian, Inc. UG.

Here are highlights from Tuesday’s Analyst Blog:

Top Stock Reports for Visa, AbbVie and Anheuser-Busch

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Visa Inc., AbbVie Inc. and Anheuser-Busch InBev SA/NV, as well as two micro-cap stocks Servotronics, Inc. and United-Guardian, Inc. The Zacks microcap research is unique as our research content on these small and under-the-radar companies is the only research of its type in the country.

These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Shares of Visa have gained +9.9% over the year-to-date period against the Zacks Financial Transaction Services industry’s gain of +10.1%. The company’s strategic acquisitions and alliances are fostering long-term growth and consistently driving its revenues. Visa, fueled by persistent increases in payments, cross-border volumes and sustained investments in technology, is witnessing significant profit growth.

The ongoing shift to digital payments is advantageous for Visa, with strong domestic volumes supporting its overall performance. A robust cash position enables the company to enhance shareholder value.

However, elevated operating expenses pose margin challenges. The Zacks analyst expect adjusted operating expenses to jump more than 10% in fiscal 2024. It is witnessing a volatile cash volume from the Asia Pacific and CEMEA regions. Consumer spending growth is also drying up. Moreover, rising client incentives will affect its adjusted revenues. As such, the stock warrants a cautious stance.

(You can read the full research report on Visa here >>>)

AbbVie’s shares have outperformed the Zacks Large Cap Pharmaceuticals industry over the year-to-date period (+31.3% vs. +26.6%). The company has successfully navigated Humira's loss of exclusivity by launching two other successful new immunology medicines, Skyrizi and Rinvoq. Skyrizi and Rinvoq are performing extremely well, bolstered by approvals in new indications, which should support top-line growth in the next few years.

AbbVie has several early/mid-stage candidates that have the potential to drive long-term growth. Boosted by its new product launches, AbbVie expects to return to robust revenue growth in 2025. AbbVie has been on an acquisition spree lately in its core space of immunology.

However, the company faces several near-term headwinds like Humira’s biosimilar erosion, increasing competitive pressure on Imbruvica and slow market growth trend for fillers in the United States and China.

(You can read the full research report on AbbVie here >>>)

Shares of Anheuser-Busch have outperformed the Zacks Beverages - Alcohol industry over the past six months (+2.7% vs. -6.5%). Continued consumer demand for its brands, pricing actions, ongoing premiumization, and other revenue management initiatives have been drivers. BUD’s relentless execution, investment in brands and accelerated digital transformation aided sales growth in second-quarter 2024.

The expansion of the Beyond Beer portfolio, and investments in B2B platforms, e-commerce and digital marketing bode well. For 2024, AB InBev expects EBITDA growth of 4-8%. We expect normalized EBITDA to increase 5.3% in 2024.

However, AB InBev’s continues to witness elevated costs stemming from commodity cost inflation, investments to support long-term growth and elevated operating costs. SG&A expense rose 2.3% on an organic basis in the second quarter.

(You can read the full research report on Anheuser-Busch here >>>)

Servotronics’ shares have declined -7.3% over the year-to-date period against the Zacks Diversified Operations industry’s decline of -8.2%. This microcap company with market capitalization of $29.19 million saw revenues rise of 15.3% year over year to $12.3 million, driven by increased volumes and improved pricing. The gross margin expanded from 14.6% to 25%, reflecting operational efficiencies.

SG&A expenses decreased year over year to $2.4 million from $3.3 million as restructuring costs faded, turning a $1.7-million loss into a $0.7-million profit. Cash flow improved by $6.6 million in the first half of 2024, aided by lower receivables. The company reduced its line of credit to $1.5 million.

Servotronics expects strong demand from its aerospace and defense markets, benefiting from its focus on high-margin, technology-driven products following the sale of its Consumer Products Group. This strategic shift, combined with its position in long-term growth markets, supports revenue and earnings growth, enhancing shareholder value.

(You can read the full research report on Servotronics here >>>)

Shares of United-Guardian have outperformed the Zacks Medical - Products industry over the past year (+97.4% vs. +18.8%). This microcap company with market capitalization of $64.82 million saw a 27% increase in sales for the six months ended June 30, 2024, driven by rising demand for its personal care and medical products, with sales reaching $6.65 million from $5.22 million in 2023.

Cosmetic ingredient sales surged 84% year over year in the second quarter and 115% in the first half, reflecting the company’s strong market position and distributor relationships. Net income grew 55% year over year, highlighting improved profitability through efficient cost management.

Diversified growth in medical lubricants and pharmaceuticals adds to the company’s resilience. Strong cash flow, low debt and increased investment income provide financial stability. United-Guardian’s growth prospects in high-margin segments like cosmetics suggest continued long-term potential. Given these favorable conditions, investing in UG stock is advisable.

(You can read the full research report on United-Guardian here >>>)

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