GlaxoSmithKline plc GSK is scheduled to report fourth-quarter and full-year 2018 results on Feb 6, before market open. In the last reported quarter, the company delivered a negative surprise of 3.49%.
Shares of Glaxo have underperformed the industry in the past six months. The stock has lost 4.2% against the industry’s increase of 1.2%.
Glaxo’s earnings performance has been mixed so far. The company’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice with the average beat being 1.61%.
Let’s see how things are shaping up for this quarter.
Factors to Consider
The company’s Pharmaceuticals segment is expected to be driven by solid sales of new HIV products, Tivicay and Triumeq. However, sales of another HIV drug, Epzicom/Kivexa are likely to decline due to more severe generic competition, particularly affecting the European market. Notably, the company’s latest product from the HIV portfolio, Juluca, had a strong uptake in the first nine months of 2018. Approval of Juluca in EU in May also boosted third-quarter sales. The same momentum is expected in the fourth quarter. The impact of approval for Juluca in Japan in late November remains to be seen.
Sales of its new respiratory drugs, Ellipta products and Nucala are likely to offset the declines in sales of older respiratory products, namely Seretide, Advair and Avodart. In August, Nucala was approved in Europe for pediatric patients with severe asthma. The approval is likely to have a positive impact on sales. However, competition is rising with the launch of AstraZeneca’s Fasenra and Dupixent in the United States. Glaxo expects sales growth for Nucala to be sluggish.
In November, the company received approval for Trelegy Ellipta’s label expansion to include patients with chronic obstructive pulmonary disease (“COPD”) in Europe. However, we expect minimal impact on the drug’s sales in the soon-to-be reported quarter.
Glaxo’s immuno-inflammation drugs like Benlysta are expected to perform well in the fourth quarter.
The Vaccines segment is likely to consistently benefit from a sustained uptake of Shingrix and Hepatitis vaccines. Meningitis vaccines like Bexsero and Menveo, acquired from Novartis AG NVS, enjoyed strong demand. However, supply constraints for Menveo in European and International markets pulled down sales growth lower in the third quarter. We expect demand for these vaccines to remain strong while supply constraints may partially offset the strong growth.
In Consumer Healthcare segment, sales are likely to be driven by Oral health, Wellness and Nutrition products. However, rising competition in Europe and declining sales of the Skin health category will have a negative impact. In December, Glaxo along with Pfizer formed a new joint venture, merging their consumer healthcare units and creating the world’s largest consumer healthcare business. However, synergies expected from this venture are unlikely to be seen in the fourth quarter. The company also announced divestiture of its Horlicks and other nutrition products business in India and Bangladesh to London-based consumer giant Unilever in the same month.
In January, the company completed its acquisition of TESARO, adding the latter’s PARP inhibitor, Zejula, to its oncology portfolio. Late last month, the FDA approved the first generic version of Advair developed by Mylan for asthma and COPD.
We expect Glaxo to provide updates on Zejula’s integration into the company’s portfolio and the impact of the launch of Advair generic on its fourth-quarter earnings call. Investors may ask questions on the company’s path to offset any unfavorable impact of generics on Advair sales.
Our proven model does not conclusively show that Glaxo is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Earnings ESP: Glaxo has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 69 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Glaxo carries a Zacks Rank #3, which when combined with Earnings ESP of 0.00% makes surprise prediction difficult.
We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
GlaxoSmithKline plc Price and EPS Surprise
GlaxoSmithKline plc Price and EPS Surprise | GlaxoSmithKline plc Quote
Stocks to Consider
Here are some biotech stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.
BioDelivery Sciences International, Inc. BDSI has an Earnings ESP of +38.46% and a Zacks Rank #1. The company is expected to release fourth-quarter results on Mar 21. You can see the complete list of today’s Zacks #1 Rank stocks here.
Seattle Genetics, Inc. SGEN has an Earnings ESP of +12.82% and a Zacks Rank #2. The company is scheduled to release fourth-quarter results on Feb 7.
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