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Glaxo (GSK) Q2 Earnings: Can the Stock Pull a Surprise?
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GlaxoSmithKline plc (GSK - Free Report) is scheduled to report second-quarter 2016 results on Jul 27. Last quarter, the company delivered a negative earnings surprise of 5.00%. Let’s see how things are shaping up for this quarter.
Factors at Play
With focus on its three core business – Pharmaceuticals, Vaccines and Consumer Healthcare – Glaxo expects core earnings growth to be 10–12% (at constant exchange rates) in 2016.
The Pharmaceuticals segment is expected to return to growth this year, driven by new products Anoro Ellipta, Nucala, Tanzeum/Eperzan and others more than offsetting the declines in Seretide, Advair, established products and Avodart. While Advair sales in the U.S. are expected to be down 20%, Seretide sales in Europe will tank 20%. Meanwhile, the HIV portfolio is expected to continue building throughout the year, backed by strong growth in products like Tivicay and Triumeq.
The Vaccines segment is expected to remain volatile on a quarterly basis (particularly in emerging markets) due to factors like the timing of government tenders. The segment, however, will benefit from the continued uptake of meningitis vaccines. Bexsero and Menveo (acquired from Novartis AG (NVS - Free Report) are expected to witness growth during the quarter as well.
At Consumer Healthcare, strong growth in Flonase, which was backed by the launch of a number of innovative line extensions, drove results in the previous quarter. This trend is expected to continue in the to-be-reported quarter as well. Advertisement and promotional activity for the product may have gone up this quarter.
Notably, currency movement is expected to provide tailwinds to second-quarter sales.
We expect investors to focus on the company’s performance, sales ramp-up of newly launched drugs and pipeline updates during the second-quarter earnings call.
Surprise History
Glaxo’s performance has been pretty good so far, with the company’s earnings surpassing expectations thrice in the four trailing quarters. Overall, the company has delivered an average positive surprise of 6.28%.
Our proven model does not conclusively show that Glaxo is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Glaxo is 0.00% as the Most Accurate estimate stands in line with the Zacks Consensus Estimate of 54 cents.
Zacks Rank: Glaxo currently carries a Zacks Rank #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are a couple of health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.
Amgen Inc. (AMGN - Free Report) has an Earnings ESP of +1.10% and a Zacks Rank #3. It is scheduled to report second-quarter results on Jul 27.
Bristol-Myers Squibb Co. (BMY - Free Report) has an Earnings ESP of +1.49% and a Zacks Rank #1. It is scheduled to report second-quarter results on Jul 28.
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Glaxo (GSK) Q2 Earnings: Can the Stock Pull a Surprise?
GlaxoSmithKline plc (GSK - Free Report) is scheduled to report second-quarter 2016 results on Jul 27. Last quarter, the company delivered a negative earnings surprise of 5.00%. Let’s see how things are shaping up for this quarter.
Factors at Play
With focus on its three core business – Pharmaceuticals, Vaccines and Consumer Healthcare – Glaxo expects core earnings growth to be 10–12% (at constant exchange rates) in 2016.
The Pharmaceuticals segment is expected to return to growth this year, driven by new products Anoro Ellipta, Nucala, Tanzeum/Eperzan and others more than offsetting the declines in Seretide, Advair, established products and Avodart. While Advair sales in the U.S. are expected to be down 20%, Seretide sales in Europe will tank 20%. Meanwhile, the HIV portfolio is expected to continue building throughout the year, backed by strong growth in products like Tivicay and Triumeq.
The Vaccines segment is expected to remain volatile on a quarterly basis (particularly in emerging markets) due to factors like the timing of government tenders. The segment, however, will benefit from the continued uptake of meningitis vaccines. Bexsero and Menveo (acquired from Novartis AG (NVS - Free Report) are expected to witness growth during the quarter as well.
At Consumer Healthcare, strong growth in Flonase, which was backed by the launch of a number of innovative line extensions, drove results in the previous quarter. This trend is expected to continue in the to-be-reported quarter as well. Advertisement and promotional activity for the product may have gone up this quarter.
Notably, currency movement is expected to provide tailwinds to second-quarter sales.
We expect investors to focus on the company’s performance, sales ramp-up of newly launched drugs and pipeline updates during the second-quarter earnings call.
Surprise History
Glaxo’s performance has been pretty good so far, with the company’s earnings surpassing expectations thrice in the four trailing quarters. Overall, the company has delivered an average positive surprise of 6.28%.
GLAXOSMITHKLINE Price and EPS Surprise
GLAXOSMITHKLINE Price and EPS Surprise | GLAXOSMITHKLINE Quote
Earnings Whispers
Our proven model does not conclusively show that Glaxo is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Glaxo is 0.00% as the Most Accurate estimate stands in line with the Zacks Consensus Estimate of 54 cents.
Zacks Rank: Glaxo currently carries a Zacks Rank #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are a couple of health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.
Amgen Inc. (AMGN - Free Report) has an Earnings ESP of +1.10% and a Zacks Rank #3. It is scheduled to report second-quarter results on Jul 27.
Bristol-Myers Squibb Co. (BMY - Free Report) has an Earnings ESP of +1.49% and a Zacks Rank #1. It is scheduled to report second-quarter results on Jul 28.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>