Novo Nordisk Before Q2 Earnings: How Should Investors Play the Stock?

Core Insights - Novo Nordisk (NVO) is set to report its Q2 2025 results on August 6, 2025, with expected revenues of $11.79 billion and earnings of 93 cents per share [1][9] - The company's 2025 earnings per share (EPS) estimate has slightly improved from $3.84 to $3.86, while the 2026 EPS forecast has decreased from $4.64 to $4.20 [2] - NVO's earnings surprise history shows mixed results over the past four quarters, with one earnings beat, one match, and two misses, averaging a surprise of 0.02% [6] Financial Performance - NVO's preliminary earnings for Q2 2025 were reported at 91 cents per American Depositary Receipt, with sales increasing by 18% at constant exchange rates [11] - The company has revised its 2025 sales growth forecast to 8-14%, down from 13-21%, and operating profit growth to 10-16%, down from 16-24% [13] - The decline in guidance is attributed to weaker demand for key drugs Wegovy and Ozempic, particularly in the U.S. market [13][14] Market Dynamics - NVO's sales are primarily driven by semaglutide-based drugs, with Wegovy being the largest contributor, recently expanded for cardiovascular benefits [12] - The company faces significant competition from Eli Lilly, which has launched Mounjaro and Zepbound, both of which are gaining market share [23] - The presence of compounded versions of Wegovy in the U.S. is negatively impacting sales, despite regulatory actions taken by the FDA [14][25] Competitive Landscape - Eli Lilly's drugs have shown stronger clinical results and are quickly gaining traction, potentially shifting patient preference away from Wegovy [23] - Other companies like Amgen and Viking Therapeutics are also advancing in the GLP-1 space, increasing competitive pressure on NVO [24] - NVO's recent termination of a collaboration with Hims & Hers Health may hinder its efforts to increase Wegovy's patient access [25] Stock Performance and Valuation - Year-to-date, NVO shares have declined by 44%, significantly underperforming the industry and the S&P 500 [15] - The stock is currently trading at a forward price/earnings ratio of 11.87, lower than the industry average of 14.28 and its five-year mean of 29.25 [17] - The company's stock decline is attributed to regulatory setbacks, disappointing pipeline results, and increased competition [22][28] Future Outlook - Despite recent challenges, NVO is making progress in its pipeline, with ongoing development of new candidates for diabetes and obesity [26] - The company is also expanding its rare disease segment, which may provide additional growth opportunities [26] - However, the near-term risk/reward profile appears unfavorable due to heightened volatility and competitive pressures [28]