) reported fourth quarter earnings of $1.64 per American
depositary shares (ADS), beating the Zacks Consensus Estimate of
$1.00 and the year-ago earnings of 57 cents per ADS. Investors
reacted positively to the news with the stock gaining 1.55%.
Revenues were up 5% year over year at constant exchange rates
(CER) to $11.2 billion. Revenues were above the Zacks Consensus
Estimate of $11.1 billion.
Earnings in 2013 were $3.47 per ADS compared with $2.91 in the
year-ago period. Full year earnings were below the Zacks
Consensus Estimate of $3.68. Revenues for the year inched up 1%
year over year (at CER) to $41.6 billion. The Zacks Consensus
Estimate for 2013 stood at $42.3 billion.
All growth rates mentioned below are on a year-on-year basis and
The Quarter in Detail
The company operates through two segments: Pharmaceuticals and
Vaccines and Consumer Healthcare. Pharmaceuticals and Vaccines
sales were up 6% while Consumer Healthcare sales remained flat.
Pharmaceuticals revenues increased 5%. Vaccines revenues
grew 12% on the back of strong performances in the U.S. and
Emerging Markets and Asia Pacific (EMAP).
The Pharma and Vaccines segment performed well in the U.S. (up
5%), Japan (up 17%) and EMAP (up 5%). Segmental sales were
disappointing in Europe with sales falling 2%.
Sales benefited from re-stocking by wholesalers and retailers in
the U.S. Sales in Europe fell due to pricing pressure and generic
competition. In EMAP, favorable vaccine tender phasing more than
offset the impact of ongoing investigation in China.
In the Consumer Healthcare division, turnover increased in Oral
Care (4%), Nutrition (6%) and Skin Health (5%), which was
completely offset by a decrease in sales in Total Wellness (6%).
Sales increased in the Rest of the World (5%) and decreased in
Europe (4%) and the U.S. (2%).
The company bought back shares worth £1,504 million during 2013.
Share repurchases in 2014 are expected in the range of £1-£2
The company declared an interim dividend of about 75 cents per
Glaxo expects to report revenue growth of approximately 2% with
core earnings growth of 4%-8% (both at CER) for 2014 from the
year-ago period on an ex-divestment basis. The pre-earnings Zack
Consensus Estimate was $3.73 per share for 2014.
The company generated incremental cost savings of approximately
£400 million in 2013 benefiting primarily from the ongoing
structural initiatives. As Glaxo continues to pursue
restructuring and cost-cutting initiatives, the company expects
to generate incremental cost savings of approximately £400
million in 2014 as well.
The company is also focusing on its core assets and pursuing the
divestment of non-core assets. Glaxo raised £2.5 billion through
divestments (thrombosis brands, Arixtra and Fraxiparine and
nutritional drinks brands Lucozade and Ribena) in 2013. The
company plans to continue to divest in 2014.
Multiple pipeline related news are expected, including six phase
III data readouts, before the end of 2015. In this time period
the company also plans to initiate phase III studies for 10
candidates targeting key areas including respiratory, oncology
Glaxo received U.S. Food and Drug Administration (FDA) approvals
and launched several drugs in the reported year including Breo
Ellipta, Tafinlar, Mekinist andTivicay among others. New product
approvals have strengthened Glaxo's respiratory, vaccines, HIV
and oncology portfolio. The company plans to launch Anoro Ellipta
in the U.S. shortly.
Glaxo's fourth quarter results were above expectations with both
earnings and revenues beating the Zacks Consensus Estimate. New
products should continue to boost revenues in coming quarters. We
are encouraged by the progress in Glaxo's pipeline. We are also
pleased with the company's efforts to control cost and
restructure operations. However, we remain concerned about the
challenges faced by the company in the form of generic
competition and pricing pressure. Additionally, we believe that
any strict action enforced by the Chinese government will
significantly impact Glaxo's top line.
Glaxo carries a Zacks Rank #4 (Sell). Some better-ranked stocks
Salix Pharmaceuticals Ltd.
). While Actelion and Salix carry a Zacks Rank #1 (Strong Buy),
Allergan holds a Zacks Rank #2 (Buy).
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