GlaxoSmithKline, plc (GSK): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Glaxo's first quarter 2014 earnings were up 2% to $0.70 per ADS, but missed the Zacks Consensus Estimate of $0.72. Revenues declined 2% y/y at CER to $9.3 billion. Glaxo expects to report revenue growth along with core earnings growth of 4% 8% (both at CER) in 2014 on an ex-divestment basis. We are 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 and other governments will significantly impact the top line. In view of these challenges along with currency headwinds, we believe that Glaxo is overvalued at current levels. Thus, we maintain an Underperform recommendation on the stock.

Overview:

GlaxoSmithKline plc offers pharmaceutical products and other health-related consumer products. These products are offered worldwide through two major divisions: Pharmaceuticals and Vaccines and Consumer Healthcare. In particular, the Pharmaceuticals and Vaccines segment delivers prescription drugs and vaccines. The Consumer Healthcare segment delivers over-the-counter (OTC) medicines, oral care products and nutritional health care products. The company has operations in more than 100 countries.

Glaxo has its large R&D centers in the UK, U.S., Spain, Belgium and China and is focusing on countries with high-growth potential, which includes Asia-Pacific, Latin America and Japan. Glaxo has also made several strategic investments in emerging markets in an effort to exploit higher growth opportunities in those regions. It is also looking towards acquisitions to grow and diversify its business. The company has made quite a few acquisitions over the last few quarters including those of Human Genome, Cellzome and Okairos. The company plans to pursue bolt-on acquisitions in the near future.

Pharmaceuticals and Vaccines and Consumer Healthcare contributed 80.4% and 19.6%, respectively, to total revenues in 2013. Total sales for 2013 were 26.5 billion (approximately $41.6 billion).

The company has its headquarters in Brentford, UK.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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