- Shares languish ahead of Q3 update
- Stronger than expected first half
- Analysts trim forecasts
Shares in GSK (GSK) are down by around a fifth since May 2024 and languish near 12-month lows despite management upgrading sales and profit guidance in the first and second quarters and recently (10 Oct) settling 93% of outstanding Zantac litigation cases.
The biopharmaceutical giant cannot seem to shake off the poor sentiment which hangs like a cloud over the shares, but this also means the bar is set relatively low going into third quarter results next Wednesday (30 Oct).
STRONG FIRST HALF AND UPGRADES
As a reminder, management expects to deliver full year sales growth in the range of 7% to 9% (up from 5% to 7%) and core EPS (earnings per share) growth of 10% to 12% (up from 8% to 10%).
The company delivered stronger than expected 14% growth in core EPS to 50.4p in the first half. The dividend policy remains unchanged with 15p per quarter expected to deliver 60p per share for the full year, representing a yield of just over 4% at the current share price.
Recent revisions to consensus full year forecasts show analysts trimming their expectations by around 2% since September, which may explain some of the share price weakness. It also means 2024 earnings expectations have barely moved over the last 18 months.
Analysts at Berenberg believe several readouts from GSK’s pipeline of drugs in development present a potential catalyst for the shares going into the end of the year.
Investors may need more persuading but given the single digit PE (price to earnings) ratio, representing a wide discount to peers and a 4% dividend yield, expectations going into the results are not overly optimistic.
