Stock Watch: Contrasting Novartis And J&J Stock Movements Defy Explanation

Strong Dollar Should Not Be Overlooked In Q2 Results

26 Jul 2022

• By Andy Smith

Among equity investors there is concern about the impact of macroeconomic headwinds on second-quarter earnings. The first two big life sciences companies’ reports did nothing to alleviate those concerns.

Novartis AG was the first life sciences company to report second-quarter 2022 earnings and was rewarded with a 4% stock price rise compared to the NYSE Arca Pharmaceutical Index’s same-day 1% gain. I was initially surprised that investors were rewarding Novartis for reporting net sales and core earnings per share (EPS) that declined by 1.4% and 6%, respectively, on the same quarter of 2021 (which provided a tough EPS comparison without its now-divested stake in Swiss compatriot, Roche Holding AG). (Also see "Novartis Finance Chief Rules Out Large M&A" - Scrip, 19 July, 2022.) Novartis’s sales were in line with analysts’ consensus estimates and EPS were about 3% ahead of analyst expectations.

Unlike Roche, Novartis reports in US dollars. A significant worry in the run-up to this earnings season has been that the strength of the dollar in the second quarter would...

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