Interactive Investor

Why Europe’s biggest company just got much bigger

This business has been flavour of the month for some time, and its share price is up almost two-thirds in the past year. Analysts think it could go even higher after these results.

31st January 2024 15:48

Graeme Evans from interactive investor

The earnings upgrade cycle of Europe’s most valuable company was today backed to continue after another set of “beat and raise” results by healthcare group Novo Nordisk A/S ADR (XETRA:NOVA). 

Shares in the Danish company touched a record following the release of 2023 figures, which showed more than 40 million people now benefit from its diabetes and obesity treatments. Sales of $33.7 billion (£26.4 billion) rose 36% in constant currency and operating profits lifted 44%.

Founded over a century ago, Novo’s continued growth has been a constant in a turbulent past decade for European markets. As we reported this month, its market value combined with those of Lvmh Moet Hennessy Louis Vuitton SE (EURONEXT:MC) and semiconductor supplier ASML Holding NV (EURONEXT:ASML) have grown six-fold over those 10 years.

President and chief executive Lars Fruergaard Jørgensen pointed out in the summer: “It is not often that you have a 100-year-old company and you’re still growing at 30%.”

The driving force has been blockbuster demand for Ozempic as a treatment of type 2 diabetes and Wegovy for weight-loss and long-term weight management. They are based on the drug semaglutide, which was developed by the company.

In August, Novo’s valuation jumped by a fifth after it said that semaglutide 2.4-mg reduced major cardiovascular events in overweight adults by as much as 20%.

For 2024, sales growth is expected to be 18-26% higher at constant currency and operating profit growth is forecast by the company to be 21-29%.

Jørgensen said: “Our focus in 2024 will be on reaching more patients, progressing and expanding our pipeline as well as the continued significant expansion of our production capacity.

The company, which is one of the biggest holdings in the Fundsmith Equity fund, has increased its total dividend for the year by 52% and also announced a new share buyback programme of up to 20 billion kroner (£2.3 billion).

Bank of America reiterated its “buy” recommendation after the 2023 results came in slightly ahead of expectations and company guidance for 2024 pointed to a 4% upgrade on consensus. It notes that Novo is usually conservative at the start of the financial year.

The bank said: “Novo share price outperformance in the last 18 months has been driven by a Ozempic/Wegovy earnings upgrade cycle. We expect the earnings upgrade cycle to continue, with us about 12% ahead of the consensus in 2024.”

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