Financial performance in 3Q17
In 3Q17, GlaxoSmithKline (GSK) reported global sales close to 7.8 billion pounds, which is a year-over-year (or YoY) rise of 2% on a constant exchange rate (or CER) basis and 4% YoY growth on an actual exchange rate (or AER) basis. The company reported earnings per share (or EPS) close to 24.8 pounds in 3Q17, which is a YoY rise of 46% on a CER basis and 49% on an AER basis. GlaxoSmithKline also reported adjusted EPS close to 32.5 pounds in 3Q17 and expects to witness a 3% to 5% YoY rise in adjusted EPS for 2017.
The strong top-line and bottom-line performances in 3Q17 were mainly attributed to the rapid uptake of drugs from GlaxoSmithKline’s HIV, respiratory, and vaccines franchises. Additionally, the company also witnessed a rise in operating margins arising from an improvement in the cost structure as well as integration benefits with Novartis’s (NVS) acquired business in the Vaccines and Consumer health segments.
In 3Q17, GlaxoSmithKline reported an adjusted operating margin of close to 20% for its Consumer Health Business including a 1.3% benefit arising from favorable foreign exchange fluctuations. The company is expected to report an adjusted operating margin of around 20% for its Consumer Healthcare business by 2020. The company, however, witnessed increased pricing pressures, which have managed to offset the benefits of enhanced cost efficiencies and a favorable product mix in the Pharma segment. GlaxoSmithKline expects its margins to continue being affected by these pressures. Notably, GlaxoSmithKline accounts for around 0.99% of the Vanguard Total International Stock ETF’s (VXUS) total portfolio holdings.
Analysts’ recommendations for GlaxoSmithKline
Of the 31 analysts covering GlaxoSmithKline in January 2018, five have recommended a “strong buy,” seven have recommended a “buy,” 15 have recommended a “hold,” three have recommended a “sell,” and only one has recommended a “strong sell.”
Analyst recommendations for peers
Of the 30 analysts covering Novartis (NVS) stock in January 2018, 46.7% recommend a “buy.” About 36.8% of the 19 analysts covering Perrigo (PRGO) stock recommend a “buy,” and 54.2% of the 24 analysts tracking Pfizer (PFE) recommend a “buy.”
In the next part, we’ll look at the revenue growth prospects for GlaxoSmithKline for 2017.