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What Gilead Sciences’ Bottom Line Is Expected to Look Like in Q2

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Operational performance

Gilead Sciences’ (GILD) selling, general, and administrative expenses are expected to increase 10.87%, from $827 million in Q2 2017 to $916.87 million in Q2 2018. Its research and development expenses are expected to increase 8.78%, from $812 million in Q2 2017 to $883.27 million in Q2 2018. Its expenses on stock-based compensation are expected to rise from $61 million in Q2 2017 to $194.33 million in Q2 2018.

The company’s interest expense is expected to be $282.8 million in Q2 2018 compared to $269 million in Q2 2017.

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Bottom line

Gilead Sciences is expected to generate net income of $1.62 billion in Q2 2018 compared to $3.07 billion in Q2 2017, a decrease of 47.31%. That indicates a contraction in net margins from 43.03% in Q2 2017 to 31.14% in Q2 2018. It also translates to a net income per share of $1.26 in Q2 2018 compared to $2.33 in Q2 2017.

Analysts’ recommendations

Of the 27 analysts covering Gilead Sciences in July, 18 of them have given the stock a “buy” or higher rating, and nine have given it a “hold.” The mean rating for the stock is 2.07 with a target price of $86. That implies an upside potential of 17.2% over its trading price of $76.32 on July 19.

In comparison, its peers Celgene (CELG), Alexion Pharmaceuticals (ALXN), and Bristol-Myers Squibb (BMY) have mean ratings of 2.25, 1.74, and 2.55, respectively, and target prices of $112.54, $158.89, and $57.56, respectively.

Price performance

In 2018, Gilead stock touched a high of $89.54 on January 29 and then declined steadily to $64.43 on May 7. After that, it has recovered to its current level of $76.

Gilead is trading at a forward PE multiple of 11.85x. Its price-to-sales ratio is 4.03x, and its price-to-book ratio is 4.83x.

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