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Glaxo (GSK) Misses Earnings & Revenue Estimates in Q4

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GlaxoSmithKline plc (GSK - Free Report) , one of the largest health care companies, reshaped its business following the March 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). Glaxo has created a joint venture (“JV”) with Pfizer earlier in 2019, thereby combining their consumer healthcare unit.

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, Glaxo is currently focusing on its core assets and divesting non-core assets.

Meanwhile, like many of its peers, Glaxo is facing challenges in the form of stiff competition, genericization and pricing pressure. 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 impressive so far, with the company’s earnings beating expectations in each of the trailing four quarters. Overall, the company has delivered an average positive surprise of 17.23%.

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 Miss: Glaxo reported core earnings of 65 cents per American depositary share in the fourth quarter of 2019, which missed our consensus estimate of 68 cents. Core earnings declined 16% year over year at constant exchange rate (“CER”).

Revenues Miss: Revenues were up 11% year over year at CER to $11.57 billion (£8.9 billion).  Revenues also missed the Zacks Consensus Estimate of $11.77 billion.

Key Stats: Glaxo initiated a two-year program to split itself into two standalone entities – a biopharma company and a consumer healthcare company. The program is expected to cost £2.4 billion with separation of Consumer Healthcare JV is expected to cost the company additonal one-time charge of £600-700 million.  Sales in Vaccines segment surged 21% at CER while Consumer Healthcare sales increased 37%. Pharmaceuticals sales were down 4% at CER. The Respiratory segment increased 9% at CER. HIV product sales remained flat at CER. Growth in Respiratory segment was completely offset by decline in sales of Established Pharmaceuticals segment.

2020 Guidance: Glaxo expects adjusted EPS to decline 1% to 4% at CER, year over year, in 2020.

Share Price Impact: Shares fell almost 1% in pre-market trading.

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

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