Swiss-based pharmaceutical company Novartis (NVS) reported a 23 percent increase in fourth-quarter profit on Thursday. The company attributes much of the growth to the sales of its top two drugs Diovan and Glivec as well as successes in its generic drug unit.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_01_18_Novartis.mp3
Earnings were reported at $1.66 billion in the forth quarter. This result was slightly lower than what analysts had forecast. On the Zurich market, Novartis shares dropped roughly 0.5 percent. Overall sales for the company rose 16 percent in the last quarter of 2005.
CEO Daniel Vasella said in a company statement, “The strong performance in 2006 stems from our commitment to innovation and reflects the impact of strengthening our healthcare portfolio.”
Novartis said profits in 2006 were 17 percent over those of the previous year and this was the 10th straight year for record profit levels.
Vasella says record earnings are likely in 2007. Novartis has several new vaccines and new drugs that fight hypertension, diabetes and macular degeneration. The optimistic CEO has laid his hopes on the backs of these drugs.
Novartis experienced its most impressive results in its Sandoz generic drugs unit. There, sales increased 27 percent to around $6 Billion. Annual turnover rose 15 percent in 2006 to a level of $37.0 billion.
Novartis said it would offer shareholders a 17 percent larger dividend than last year.
Financial pundit Jim Cramer plugged the stock in his November 30, 2006 article on thestreet.com website.
The Motley Fool website also proclaimed Novartis one of their “Kings of Cash” in a recent article
Competitors:
Competitors for NVS include: Johnson & Johnson (JNJ), Merck & Co. Inc. (MRK), Pfizer Inc. (PFE), Alcon Inc. (ACL), AtheroGenics Inc. (AGIX), Alnylam Pharma. Inc. (ALNY), Amgen Inc. (AMGN), Avanir Pharmas. (AVNR), Axcan Pharma Inc. (AXCA), AstraZeneca plc (AZN), Bristol-Myers Squibb Co. (BMY), Cephalon Inc. (CEPH), GlaxoSmithKline PLC (GSK), Shire PLC (SHPGY), Taro Pharma. Indus. Ltd. (TARO), Theravance Inc. (THRX), Valeant Pharmas. Intl. (VRX), and Wyeth (WYE).
Potential Trades:
Although the earnings came in under analyst’s predictions, something that might cause a dip in the price today, we are bullish on the stock for the coming month. So let’s take a look at February option trades for Novartis using the powerful lens provided to us by the PowerOptions web-based option search tools. For this search, we will use the Strategy Search Summary Tool making sure we check the box for both covered call and bull-call debit spread.
| Covered Call – Novartis AG (NVS) $ 59.53 (30) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
%Dnsd. Prot. |
%If Inch. |
%If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NVSBL | 07 FEB 60.00 | $1.05 | 1.80% | 1.80% | 2.60% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull-Call Debit Spread — Novartis AG (NVS) $ 59.53 (30) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Opt |
Strike Info |
Bid Price |
Buy Option |
Strike Info |
Ask Price |
% Return |
Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NVSBL | 07 FEB $60 | $1.05 | NVSBK | 07 FEB $55 | $5.00 | 26.60% | $58.95 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The covered call trade, an out of the money covered call, offers 1.8% downside protection and a potential profit of 1.8% (30 days) if the stock remains unchanged. If the stock rises to or above its $60.00 strike price, the potential profit becomes 2.6%. The net cost of this trade, per 100 options, is $5,848.00.
The second trade is a bull call debit spread. This trade offers 26.6% potential profit if the stock increases above $60.00. If the stock decreases below the break-even price of $58.95, the investment begins to lose money. If the stock price goes below the lower strike price of $55.00, the entire investment is lost. The net cost of this trade, per 100 options, is $395.00. For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions’ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.
PowerOptions’ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.
[tags]Diovan, Glivec, Zurich, Daniel Vasella, Sandoz, Jim Cramer, The Motley Fool, ACL, Alcon Inc., AGIX, AtheroGenics Inc., ALNY, Alnylam Pharma. Inc., AMGN, Amgen Inc., AVNR, Avanir Pharmas., AXCA, Axcan Pharma Inc., AZN, AstraZeneca plc, BMY, Bristol-Myers Squibb Co., CEPH, Cephalon Inc., GSK, GlaxoSmithKline PLC, JNJ, Johnson & Johnson, MRK, Merck & Co. Inc., NVS, Novartis AG, PFE, Pfizer Inc., SHPGY, Shire PLC, THRX, Theravance Inc., VRX, Valeant Pharmas. Intl., WYE, Wyeth, covered call investment strategy, investment strategy, iron condor, poweroptions , stock option trading, stock options[/tags]