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What Investors Can Glean from GlaxoSmithKline’s Revenue Trend

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GlaxoSmithKline’s revenues

GlaxoSmithKline (GSK) reported a growth of 10.9% to 6.5 billion pounds in its 2Q16 revenues. The company met Wall Street analysts’ 2Q16 estimates for revenues and earnings per share (or EPS) and reported EPS of 26 pence. Plus, analysts estimate 17% growth in its 3Q16 revenues and 13% growth in its 4Q16 revenues.

The above chart shows revenue trends and analysts’ estimates. There are various factors affecting the company’s revenues, which we’ll discuss in the coming parts of this series.

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Performance in the last quarter

GlaxoSmithKline’s top line rose by 10.9% to ~6.5 billion pounds for 2Q16, driven by an operational increase of 4% and the favorable currency impact of 6.9%. The increase in revenues was mainly driven by the addition of Novartis’s vaccines and consumer healthcare products and new pharmaceutical products to its portfolio. The positive impact of foreign exchange was due to the weakening of the pound against all major currencies .

Geographically, the US markets contributed nearly 36.2% of total revenues at 2.4 billion pounds for 2Q16, a 9% growth at constant exchange rates as compared to 2Q15. The Europe markets contributed nearly 27.1% of total revenues at 1.8 billion pounds for 2Q16, an increase of 3% at constant exchange rates as compared to 2Q15. The contribution from international markets was nearly 36.7% of total revenues at 2.4 billion for 2Q16, a 1% increase in revenues as compared to 2Q15. The increase in revenues across all geographical areas is due to the strong performance of new pharmaceutical products including HIV products and vaccines products.

Investors can consider the iShares S&P Global Healthcare (IXJ), which holds ~2.5% of its investments in GlaxoSmithKline, 8.1% of its investments in Johnson & Johnson (JNJ), 4.0% in Merck (MRK), and 2.9% in Amgen (AMGN) in order to divest the risk.

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