U.S. Markets open in 4 hrs 14 mins

GlaxoSmithKline plc Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Simply Wall St

GlaxoSmithKline plc (LON:GSK) shares fell 4.7% to UK£17.00 in the week since its latest yearly results. The result was positive overall - although revenues of UK£34b were in line with what analysts predicted, GlaxoSmithKline surprised by delivering a statutory profit of UK£0.93 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

See our latest analysis for GlaxoSmithKline

LSE:GSK Past and Future Earnings, February 8th 2020

Taking into account the latest results, the most recent consensus for GlaxoSmithKline from 17 analysts is for revenues of UK£35.1b in 2020, which is an okay 4.1% increase on its sales over the past 12 months. Statutory earnings per share are expected to rise 6.4% to UK£1.00. Yet prior to the latest earnings, analysts had been forecasting revenues of UK£34.7b and earnings per share (EPS) of UK£1.01 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

Analysts reconfirmed their price target of UK£18.80, showing that the business is executing well and in line with expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic GlaxoSmithKline analyst has a price target of UK£23.00 per share, while the most pessimistic values it at UK£15.50. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that analysts expect GlaxoSmithKline's revenue growth will slow down substantially, with revenues next year expected to grow 4.1%, compared to a historical growth rate of 7.8% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 6.8% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect GlaxoSmithKline to grow slower than the wider market.

The Bottom Line

The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that GlaxoSmithKline's revenues are expected to perform worse than the wider market. The consensus price target held steady at UK£18.80, with the latest estimates not enough to have an impact on analysts' estimated valuations.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for GlaxoSmithKline going out to 2024, and you can see them free on our platform here..

You can also view our analysis of GlaxoSmithKline's balance sheet, and whether we think GlaxoSmithKline is carrying too much debt, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.