Novo Nordisk Q2 earnings preview: Where next for NVO stock?

Key takeaways

Novo Nordisk shares are at all-time highs ahead of the results following a positive update on weight-loss drug Wegovy
Wegovy sales growth is accelerating as it hopes to secure regulatory approval later this year
Strong sales beat in weight-loss drugs by Eli Lilly heightens pressure on Wegovy
Ozempic sales dependent on company’s ability to raise supply amid shortages
Novo Nordisk trades at big premium, suggesting the bar is high ahead of the results

Novo Nordisk earnings date

Novo Nordisk will report second quarter earnings on the morning of August 10. An earnings call will be held on the same day at 1300 CEST (1200 BST or 0700 EDT).

Novo Nordisk earnings consensus

Novo Nordisk is forecast to a 33.6% year-on-year rise in quarterly revenue to DKK55,109 million and net income is seen rising 52.1% to DKK20,250 million. Diluted EPS is expected to follow higher and jump 53.7% to DKK9.01.

Novo Nordisk earnings preview

Novo Nordisk shares are at all-time highs ahead of its next set of results, having jumped 17% yesterday after it revealed its drug Wegovy – the weight-loss drug that has grabbed headlines this year – reduced the risk of a major cardiovascular event in overweight and obese adults by 20% in its latest trial.

That has investors excited considering this is a new breakthrough area, with other pharmaceutical companies also in the race. ‘People living with obesity have an increased risk of cardiovascular disease but to date, there are no approved weight management medications proven to deliver effective weight management while also reducing the risk of heart attack, stroke or cardiovascular death. Therefore, we are very excited about the results,’ said Martin Holst Lange, the executive vice president of development at Novo Nordisk.

Novo Nordisk is filing for regulatory approval in both the US and Europe this year and these will major milestones that investors will be keeping a close-eye on this year, but is already being sold as an off-label treatment in the US and is available in other countries including Denmark, Norway and Germany.

Wegovy is one of three drugs that are driving growth this year and analysts forecast it sold DKK6,976 million worth of it in the second quarter. That would be over four times higher than last year and representing a notable step-up from the DKK4,563 million of sales we saw in the first quarter as it gains traction. It should be more than enough to counter the ongoing fall in insulin sales.

There are two other key drugs that will decide how Novo Nordisk performs this year, which are diabetes drugs - its injectable Ozempic and tablet Rybelsus. Ozempic sales are forecast to be up 48% from last year in the quarter at $21,336 million while Rybelsus sales are seen rising 99% to DKK4,334 million.

The soft point will remain its rare disease segment following a temporary reduction in manufacturing and sales could fall 69.7% to DKK4,654 million.

Novo Nordisk’s performance will largely depend on how quickly it been able to scale-up production. Demand has been so strong for Ozempic that it has caused periodic supply constraints and led to shortages across several countries.

The uptake rate of Wegovy is the other major factor to watch this year, especially as competition is intensifying. US rival Eli Lilly is also at all-time highs after reporting stellar sales of its own weight-loss drug name Mounjaro this week – heightening the pressure on Wegovy sales to at least meet expectations.

Novo Nordisk raised its guidance in the last quarter and is now targeting to grow sales by 24% to 30% at constant currency this year, with operating profit to rise at a faster pace of 28% to 34%.

Where next for NVO stock?

Novo Nordisk’s faster growth profile means it trades at a sizeable premium to its rivals and trades over 60% above its 5-year historic average, suggesting the bar is particularly high ahead of the results following that well-received update on Wegovy and placing the risk to the downside ahead of the results. It would not take a lot to prompt a pullback, so a big beat will be needed to keep the rally going. We are already seeing pressure on its shares in Copenhagen today.

With that in mind, we can see the RSI was thrusted deep into overbought territory yesterday amid the explosion in volumes as traders swept-in following this week’s update. Investors will hope it can remain above the previous all-time high of $173 if it does experience a pullback. Brokers also believe the jump has made Novo Nordisk expensive considering it now sits almost 7% above the average target price of $176.

A sharper reversal has the potential to erase yesterday’s gains and see it tumble back toward $162.50.

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