Novo Nordisk, Europe’s largest pharmaceuticals manufacturer and the second largest company by market cap in European markets announced its earnings for the first fiscal quarter of the year on Wednesday, 7th May, showing mixed signs of improvement and forecast revisions. This led to a positive reaction by the market as trading opened on Wednesday morning, with the stock climbing as much as 6% in the first couple of hours of trading. The results showed positive signs in terms of group sales growth compared to last year’s first quarter earnings, coming in at 78.1bn Danish Krone, up 18% from last year, while pre-tax profit for the quarter was up 16% from last year. However, its obesity drug, Wegovy, which had driven four years of analyst and earnings upgrades, disappointed in the latest results, showing a 13% year-on-year decrease in sales.
The company also lowered its 2025 outlook, now expecting sales growth for the year to fall between 13% and 21%, compared to the previous forecast of around 16% - 24%. Similarly, the forecast for operating profit was also trimmed to a range of 16% - 24%, down from the previously expected 19% - 27%.
Looking at Novo Nordisk’s financial performance over recent years, many strong figures stand out. The stock has performed very positively, turning the company into Europe’s most valuable firm at one point. However, the question remains whether this trend will continue given declining demand for some of its products and the overall global economic uncertainty affecting multi-national corporations. Sales have been growing at an 18.9% five-year compound annual growth rate (CAGR). Dividends per share have also been rising with a 22.3% increase over the past five years. The current dividend yield sits at 2.5%, and the firm’s ability to generate cash
flow has been impressive, growing at 14.3% five-year CAGR.
Uncertainty regarding Shein’s IPO
Shein’s long-awaited London IPO has reportedly been put on hold, as the online clothing retailer assesses how to navigate the current global economic uncertainty arising from the trade war between some of its key markets. Its business strategy is directly affected by the ongoing tensions between the US and China, including tariffs and shifts in trade policy. For example, the company once benefited from the ‘de minimis’ rule in the US, which allowed imports valued below US$800 to enter the country duty free. However, Donald Trump’s push to end that exemption has caused further damage to Shein in recent weeks.
The company’s IPO, once valued at US$90bn in 2023 and down to US$30bn by February this year, reportedly received UK regulatory approval for a London listing last month. However, Chinese regulatory approval, a key requirement, is still pending, as Shein was originally a Chinese company.
With the ‘de minimis’ rule no longer in effect in the US and Chinese imports facing tariffs of up to 124%, certain Shein products have seen price jumps of up to 377% in the US. As a result, Shein has cut back on US advertising spending in anticipation of weaker sales due to these price increases.
Another key issue around the IPO remains its valuation, especially as the company goes through strategic and operational challenges. Shein is currently exploring countries like Brazil and Turkey for operational expansion, aiming to reduce the impact of the global trade war on its business.
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