In its earnings release on July 26, 2017, GlaxoSmithKline (GSK) reported 12% growth to ~7.3 billion pounds in its 2Q17 revenues. The company surpassed Wall Street analysts’ 2Q17 estimates for revenues and earnings per share (or EPS). GSK reported EPS of 27 pence for revenues of ~7.3 billion pounds against the estimated EPS of 26 pence and revenues of 7.28 billion pounds.
The chart below shows the revenue trend for GSK over the last few quarters. In this series, we’ll discuss the factors affecting these revenues.
GlaxoSmithKline’s (GSK) stock price fell ~2.6% to close at $40.85 on July 26, 2017, compared to its previous day’s closing price of $41.96. This decline followed a negative response to its 2Q17 earnings, in which the company reported an operating loss of 20 million pounds.
However, GSK’s stock price increased in the next two trading sessions to close at $40.93 on July 28. Overall, GlaxoSmithKline’s stock price has fallen nearly 5.9% during the last 12 months.
GlaxoSmithKline’s top line rose 12% to 7.32 billion pounds for 2Q17, driven by an operational increase of 3% and a favorable currency impact of 9%. The company’s increase in revenues resulted from growth in all three segments— Pharmaceuticals, Vaccines, and Consumer Healthcare. The positive impact of foreign exchange was due to the weakening of the British pound against all major currencies of the developed countries.
Geographically, the US markets contributed nearly 37.2% of GSK’s total revenues at ~2.7 billion pounds for 2Q17, representing 5% operational growth compared to 2Q16. The European markets contributed nearly 26.8% of the company’s total revenues at ~2.0 billion pounds for 2Q17, representing 2% operational growth compared to 2Q16.
International markets contributed ~36.0% to GSK’s total revenues at ~2.6 billion pounds for 2Q17—1% operational growth compared to 2Q16. The increase in revenues across all geographical areas is due to strong performance of new pharmaceutical products including HIV products and vaccines products.
To divest company-specific risks, investors can consider ETFs like the Vanguard FTSE Developed Markets ETF (VEA), which holds 0.9% of its total assets in GlaxoSmithKline. VEA also holds 1.0% of its total assets in Novartis (NVS), 0.9% in Roche Holdings (RHHBY), and 0.5% in Sanofi (SNY).