Glaxo's second quarter 2014 earnings were down 12% (CER) to $0.64
per ADS, below the Zacks Consensus Estimate of $0.71. Revenues
declined 4% y/y (CER) to $9.3 billion. Glaxo no longer expects
revenue growth in 2014. Additionally, Glaxo expects 2014 core
earnings to be broadly in line y-o-y. We are concerned about the
challenges faced by the company in the form of increasing
competition, genericization and pricing pressure. Other factors
like weak sales in the U.S., the Chinese bribery investigation and
supply interruptions in the consumer business will affect results.
In view of these challenges along with currency headwinds, we
believe that Glaxo is overvalued and maintain an Underperform
recommendation on the stock.
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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