AstraZeneca (AZN) reported its second-quarter earnings results on July 25. The stock is already up 6.39% on the day and is trading close to $42.91.
The company reported product sales of $5.82 billion in the second quarter, a YoY (year-over-year) rise of 13% on an actual basis and a rise of 18% on a CER (constant exchange rate) basis. The company’s revenue surpassed the consensus estimate by $250 million. In the first half, it reported revenue of $11.31 billion, a YoY rise of 9% on an actual basis and 14% on a CER basis.
In the quarter, the company reported core EPS of $0.73, YoY rises of 5% on an actual basis and 1% on a CER basis. Its EPS surpassed the consensus estimate by $0.42. In the first half, the company reported core EPS of $41.62, YoY rises of 38% on an actual basis and 40% on a CER basis.
AstraZeneca’s guidance for 2019
In its second-quarter earnings release, the company revised its 2019 product sales guidance upward. It had previously estimated that its 2019 product sales would grow YoY in the high-single-digit percentage range. Instead, the company now expects product sales to rise in the low-double-digit percentage range.
Despite this change, AstraZeneca didn’t change its 2019 EPS guidance. The company reaffirmed its core EPS guidance of $3.50–$3.70. This guidance assumes lower collaboration revenue and other operating income YoY. However, the company expects its core operating profit to rise faster than its revenue, in the mid-teen percentage YoY.
The company has guided for stable capex and reduced restructuring-related expenses in 2019. It expects its 2019 effective tax rate to be 18%–22%.
Key growth drivers
The oncology franchise accounted for 36% of AstraZeneca’s revenue in the first half. It reported oncology sales of $4.06 billion, a YoY rise of 58%.
Tagrisso continues to expand its presence in global first-line EGFR-mutated non-small cell lung cancer indications. The drug’s sales were $1.41 billion in the first half, YoY rises of 86% on an actual basis and 92% on a CER basis.
Imfinzi also reported revenue of $633 million in the first half, YoY rises of 244% on an actual basis and 248% on a CER basis. Although the majority of the drug’s sales were in the US market, its revenue growth rate has been gradually moderating. However, ex-US markets such as Europe and Japan present a strong growth opportunity for Imfinzi.
Lynparza continues to be the leading poly ADP ribose polymerase inhibitor across the world. Its solid uptake in breast and ovarian cancer indications drove its sales to $520 million in the first half. It marked YoY rises of 93% on an actual basis and 100% on a CER basis.
Emerging markets was the company’s second-fastest-growing business and accounted for 35% of its total revenue in the first half. The company’s emerging market sales were $3.95 billion, YoY rises of 15% on an actual basis and 24% on a CER basis. Of these, China accounted for $2.41 billion in sales, YoY rises of 27% on an actual basis and 35% on a CER basis.
AstraZeneca is currently trading at a PE multiple of 42.47x. The multiple is higher than those of major competitors Johnson & Johnson, Bristol-Myers Squibb, and Pfizer.
The five analysts tracking AstraZeneca have an average target price of $45.43 on its stock, a potential upside of 12.59% in the next 12 months.