- Q4 sales and profit ahead of expectations
- 2023 guidance implies double-digit earnings growth
- Market consensus below new guidance
Pharma company GSK (GSK) delivered fourth quarter sales and profit above market expectations and guided for continued earnings growth in 2023.
The results and positive outlook were well received with the shares gaining 0.75% to £14.34 in early trading.
Quarterly sales of £7.38 billion were 4% ahead of analysts’ forecasts according to Shore Capital driven by stronger than expected growth in shingles drug Shingrix and the HIV franchise.
Adjusted earnings per share fell 6% in constant currencies which was 22% ahead of market expectations, partly helped by a lower tax charge. Foreign exchange effects provided a strong tailwind (+16%) which boosted reported earnings per share.
The strong finish to 2022 meant sales for the year ended 31 December 2022 were up 13% to $29.3 billion excluding exchange rate effects and 3% ahead of analysts’ forecasts.
Adjusted earnings per share came in at the top end of guidance up 15% to 139.7p per share which was around 4% ahead of market expectations according to Refinitiv data.
WHAT IS THE OUTLOOK?
Management is guiding for 2023 sales growth of 6%-8%, adjusted operating profit growth of 10%-12% and adjusted earnings per share growth of 12%-15%. The guidance excludes contributions from Covid-19 solutions.
Operating profit growth is anticipated to be higher than sales growth due to cost of sales and research and expenditure expenses growing more slowly. Higher earnings per share growth reflects favourable net finance costs and a lower tax rate of 15%.
HOW DOES IT COMPARE TO EXPECTATIONS?
Shore Capital healthcare analyst Sean Conroy reckons sales guidance is broadly in line with current market expectations while earnings per share guidance leaves room for upgrades.
‘Our FY23F sales forecast looks in line the new guidance but our earnings forecast looks at least c.5% shy of this and at the lower end of the consensus range, hence we will look to nudge up our FY23F Adj. EPS forecast to bring this in line and revert when this process is complete.’
WHAT OTHER EXPERTS ARE SAYING
Russ Mould, investment director at AJ Bell, commented: ‘After coming under considerable pressure from an activist investor to realise hidden value in the business and speed up growth, pharmaceutical group GSK has finally found the right medicine.
‘Over-the-counter medicines business Haleon (HLN) was spun off last year and GSK has now reported ‘a landmark year’ which includes record sales for its Shingrix shingles vaccine.
‘The results from the reshaped GSK have been encouraging, but this is still early days for version 2.0. Developing drugs that work and having them approved for public use can be a long process and there is no guarantee of success.’
Disclaimer: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (James Crux) own shares in AJ Bell.
