Glaxo (GSK) Stock Down Despite Q4 Earnings And Sales Beat

GlaxoSmithKline plc (NYSE:GSK) , one of the largest health care companies, reshaped its business following the Mar 2015 completion of the three-part, inter-conditional transaction with Novartis related to its Consumer Healthcare, Vaccines and Oncology businesses. Under the deal, Glaxo sold its oncology assets to Novartis and acquired Novartis’ Vaccines business (excluding influenza vaccines). Additionally, the companies created a joint venture (JV), thereby combining their consumer divisions to form a larger consumer health care business.

Following the completion of the deal, the UK-based company now focuses on its three core businesses – Pharmaceuticals (respiratory, HIV), Vaccines (pediatric, adolescent, adult, and travel vaccines) and Consumer Healthcare (wellness, oral health, nutrition and skin health products).

However, like many of its peers, Glaxo is facing challenges in the form of stiff competition, genericization, pricing pressure and slowing growth in emerging markets. In this scenario, investor focus remains on late-stage pipeline candidates and their commercial potential, restructuring and cost-cutting initiatives and performance of new products apart from the usual top-and bottom-line numbers.

Glaxo’s performance has been pretty good so far, with the company’s earnings beating expectations thrice in the trailing four quarters while posted in-line results in another. Overall, the company has delivered an average positive surprise of 6.69%.

Currently, Glaxo has a Zacks Rank #3 (Hold), but that could definitely change following the company’s earnings report which was just released. We have highlighted some of the key stats from this just-revealed announcement below:

Earnings Beat: Glaxo reported core earnings of 74 cents per American depositary share, which beat our consensus estimate of 67 cents.

Revenues Beat: Revenues were up 4% year over year at constant exchange rate (CER) to $10.4 billion (£7.6 billion). Revenues also surpassed Zacks Consensus Estimate.

Key Stats: Sales in the quarter were driven by strong performance in all the three segments, Consumer Healthcare, Pharmaceuticals and the Vaccines which were up 4%, 3% and 9% respectively at CER.

2018 Guidance: Glaxo expects EPS growth of 4-7% at CER in 2018, if no Advair generics are launched this year. However, in the event of introduction of Advair generic in the U.S. market by mid-year, Glaxo expects adjusted EPS to be flat to down 3% year over year at CER.

Share Price Impact: Shares declined more than 1% in pre-market trading as uncertainty surrounding a generic Advair launch in the United States remains an overhang.

Check back later for our full write up on GSK earnings report later!

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