- Sales and earnings top expectations
- Disappointing vaccine sales
- Raised full year outlook
Despite delivering better-than-expected second-quarter sales and earnings growth and raising its full-year guidance, pharmaceutical giant GSK (GSK) saw its shares slip 2% to £15.19 as investors focused on disappointing vaccine sales.
GSK has now delivered forecast-beating earnings in three of the last four quarters, demonstrating improved business performance amid pressure from activists to do so, but the overhang of heartburn drug Zantac litigation worries has cast a shadow over recent share price performance.
The shares have underperformed the blue-chip FTSE 100 by around 6% so far in 2024 and by 2% over the last 12-months.
WHAT DID THE COMPANY SAY?
Chief executive Emma Walmsley commented: ‘Q2 sales grew in all areas, with Specialty Medicines in particular benefitting from new product launches in oncology and HIV. In R&D (research and development), so far this year, we have secured approvals or filings for 10 major opportunities and reported positive data from 7 phase III trials.
‘All this supports our future growth and confidence to bring meaningful innovation to patients.’
Continued momentum in the business prompted management to raise full-year sales growth expectations to between 7% and 9% from the upper end of 5% to 7% previously and core operating profit growth is forecast to be in the range of 11% to 13% from 9% to 11%.
Core EPS (earnings per share) growth was upgraded to 10% to 12% from 9% to 10%.
The one ‘fly-in-the-ointment’ was a downgrade to the vaccines division where sales growth is forecast to be low to mid-single digit compared with a prior range of high-single digit to low double-digit percentage.
This follows weaker than expected sales of the firm’s shingles vaccine Shingrix due to demand weakness in the US amid destocking, partially offset by sales outside the US.
EXPERT VIEWS
Analyst Sean Conroy at Shore Capital notes consensus sales growth sits around 4.1%, assuming a 2.5% FX (foreign exchange) headwind. while EPS growth is 3.7% assuming a circa 5% exchange headwind.
GSK said it now expects slightly higher FX headwinds in 2024 which Conroy believes will ‘likely absorb any upgrades’. ‘We remain in line with consensus and within company guidance, so intend to leave our 2024 forecasts unchanged’, added Conroy.
Healthcare analyst Sheena Berry at Quilter Cheviot commented: ‘Business development to enhance the pipeline and product offering remains a clear focus, and the ongoing Zantac litigation continues to be an overhang on the company’s prospects.’
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