GlaxoSmithKline, plc's (GSK) second quarter earnings of $0.79 per ADS were below the Zacks Consensus Estimate of $0.84. Earnings fell 2.5% year over year. Revenues fell 7.3% y/y to $10.2 billion, missing the Zacks Consensus Estimate of $10.4 billion.
Glaxo expects 2012 revenues to remain flat y/y (at CER). Earlier, Glaxo was expecting revenues to grow from 2011 levels. Guidance was lowered due to EU pricing pressure. A major part of Glaxo's revenues will be exposed to generic competition as multiple drugs are scheduled to lose exclusivity in the next few years. We expect the company's top line as well as gross margins to remain under pressure in the coming quarters.
In addition to generic competition, US health care reform and EU pricing pressure will continue to affect sales. Thus, we maintain our Underperform recommendation on Glaxo, which carries a Zacks #4 Rank (short-term Sell rating).
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