) reported fourth quarter earnings of 57 cents per ADS, missing
the Zacks Consensus Estimate of 96 cents and falling behind the
year-ago earnings of 90 cents per ADS. Revenues remained flat
year over year at constant exchange rates (CER) at $11.0 billion.
Revenues came in slightly above the Zacks Consensus Estimate of
Earnings in 2012 were $2.91 per ADS compared with $3.62 in the
year-ago period. Full year earnings were much below the Zacks
Consensus Estimate of $3.56. Revenues for the year dropped 1%
year over year (at CER) to $42.0 billion. The Zacks Consensus
Estimate for 2012 stood at $42.6 billion.
All growth rates mentioned below are on a year-on-year basis
and at CER.
The Quarter in Detail
The company operates through two segments: Pharmaceuticals and
Vaccines and Consumer Healthcare. Both Pharmaceuticals and
Vaccines and Consumer Healthcare sales remained flat in the
quarter. Pharmaceuticals revenues fell 1% primarily due to price
cuts in the EU, generic competition and unfavorable stoking
patterns in the US. Vaccines revenues increased 10% driven by
strong performance in the US and Emerging Markets and Asia
Except for Emerging Markets and Asia Pacific/EMAP (16%),
Pharmaceuticals and Vaccines sales decreased in all other regions
including Japan (4%), US (2%) and Europe (5%).
In the Consumer Healthcare division, growth in Oral care
(10%), Nutrition (9%) and Skin Health (5%) was offset by a
decline in the Total Wellness (12%) segment. Sales decreased in
the US (4%) and Europe (8%) and increased in the Rest of the
The company bought back shares worth £2,493 million during
2012. Total share repurchases were on the higher side of the
guidance of £2 billion and £2.5 billion provided during third
quarter results. Share repurchases in 2013 are expected in the
range of £1 - £2 billion.
The company declared an interim dividend of about 69 cents per
ADS. The company expects to increase dividend payout in 2013.
The company remains on track to deliver £2.8 billion (of which
£2.5 billion has already been realized) in annual savings under
its restructuring program by 2014. Glaxo plans to supplement this
with a new major change program, which will focus on
restructuring the company's business in Europe, improving
efficiency in supply process, manufacturing and Research and
Development (R&D). The program is expected to yield annual
cost savings of at least £1 billion by 2016.
Glaxo expects to report revenue growth of approximately 1% (at
CER) with core earnings growth of 3%-4% for 2013 from the
year-ago period. The pipeline is expected to advance
significantly with six candidates (Relvar/Breo, Anoro,
albiglutide, dabrafenib, dolutegravir and trametinib) under
regulatory review. Glaxo expects to launch 15 new products in the
next three years.
We are pleased with Glaxo's efforts to control cost and
restructuring operations. We are also encouraged by the progress
in Glaxo's pipeline. However, we remain concerned about the
challenges faced by the company in the form of EU pricing
pressure and generic competition.
Glaxo carries a Zacks Rank #4 (Sell) in the short run. Pharma
companies that currently look better-positioned include
). All the three companies carry a Zacks Rank #1 (Strong
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