GSK plc GSK will report its second-quarter earnings on Jul 31, before the opening bell. The Zacks Consensus Estimate for sales and earnings is pegged at $9.5 billion and $1.00 per share, respectively.
In the past 30 days, GSK’s earnings estimates have increased from $4.10 per share to $4.11 for 2024 and from $4.53 to $4.55 for 2025.
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Earnings Surprise History
The British drugmaker’s performance has been pretty decent, with the company’s earnings surpassing estimates in three of the trailing four quarters while missing the mark on one occasion. GSK delivered a four-quarter earnings surprise of 10.11%, on average. In the last reported quarter, the company delivered an earnings surprise of 15.96%.
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Earnings Whispers
Per our proven model, companies with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) have a good chance of delivering an earnings beat. This is the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
GSK has an Earnings ESP of 2.41% and a Zacks Rank #3, indicating a likely beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Factors Shaping Upcoming Results
GSK reports financial figures under three segments — Specialty Medicines, Vaccines and General Medicines.
In the second quarter, higher sales of newer products like Arexvy, Cabenuva, Juluca, Dovato, Trelegy Ellipta and Shingrix are likely to have offset the decline in sales of older HIV drugs and respiratory medicines due to generic erosion and competitive pressure. Our model suggests the Respiratory sales to be around £1.73 billion for the quarter.
In HIV, the strong sales growth trend witnessed in recent quarters of the two-drug regimens, Dovato and J&J JNJ-partnered Juluca, and long-acting regimens, Cabenuva and Apretude, might have more than offset losses in sales of the three-drug regimens in the to-be-reported quarter. Our model estimates sales from the HIV portfolio to be £1.72 billion for the quarter.
GSK’s key vaccine, Shingrix’s, sales showed a strong demand recovery in the United States, which — coupled with new launches in different countries — benefited sales in recent quarters. We expect this trend to have continued in the second quarter. Our model predicts Shingrix sales to be around £982 million.
Last year in May, the FDA approved Arexvy, GSK’s respiratory syncytial virus (RSV) vaccine, to prevent lower respiratory tract disease (LRTD) caused by RSV in older adults. This was the first RSV vaccine for older adults to be approved worldwide. The vaccine, which was commercially launched last year during the fall season, has become a key driver of GSK’s top line. Our model estimates Arexvy sales to be around £385 million.
Oncology sales are likely to have witnessed growth backed by the rising demand for PD-1 inhibitor Jemperli and PARP inhibitor Zejula sales, coupled with the recently-launched blood cancer drug Ojjaara. Sales of these drugs are likely to offset the declining Blenrep sales, which was withdrawn from the U.S. market in 2022. Our model suggests that the Oncology portfolio is expected to have generated around £279 million in sales.
Nonetheless, a single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell, or hold GSK’s stock.
Price Performance & Valuation
Year to date, GSK’s stock has gained 4.8% compared to the industry’s 20.0% growth. The stock has also underperformed the sector and the S&P 500.
GSK Stock Underperforms Industry, Sector & S&P 500
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From a valuation standpoint, GSK appears attractive relative to the industry and is trading below its mean. Going by the price/earnings ratio, the company shares currently trade at 8.92 on a forward 12-month basis, lower than 20.05 for the industry.
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Investment Thesis
GSK has its share of problems. Competitive pressure on HIV and respiratory drugs has risen. The dolutegravir HIV franchise patent expires in the 2028-2029 period. U.S. sales of Shingrix are slowing down. The Zantac litigations are also an overhang.
Nonetheless, the company’s spin-off of the Consumer unit in 2022 into a newly listed company called Haleon HLN has allowed it to focus on its pharmaceuticals business and drug development. GSK expects sales to grow in the range of 5-7% at constant exchange rate (CER) and earnings to increase between 9% and 11% in 2024. Continued sales growth of its key drugs and vaccines, contribution from new products and positive pipeline updates should drive the stock in future quarters.
Conclusion
Despite its fair share of problems, GSK demonstrated growth potential. While the company is generating decent sales and profit growth from sales of key drugs and new ones, it has also been actively pursuing collaboration and partnership deals across several therapeutic areas to drive long-term growth. It also has an attractive pipeline.
GSK plans to launch more than 20 new products/line extensions by 2026, with more than 10 having blockbuster potential. The company also strengthened its presence in oncology/hematology with acquisitions like Sierra Oncology and Tesaro.
Investors who own this stock may stay invested as GSK is generating decent sales and profit growth. Buying the stock at its present reasonable valuation can prove prudent for long-term investors. Consistently rising earnings estimates highlight analysts’ optimistic outlook for further growth.
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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 Nasdaq, Inc.
