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What's in the Cards for Glaxo (GSK) This Earnings Season?

GlaxoSmithKline plcGSK is scheduled to report third-quarter 2018 results on Oct 31, before market open. In the last reported quarter, the company delivered a positive surprise of 8.45%.

Shares of Glaxo have outperformed the industry so far this year. The stock has gained 11.4% compared with the industry's increase of 1.7%.

Glaxo's earnings performance has been pretty impressive so far. The company's earnings surpassed estimates three times in the trailing four quarters. Overall, the company came up with an average beat of 2.78%.

Let's see how things are shaping up for this quarter.

Factors to Consider

Glaxo is expected to see strong sales in its Vaccines business segment. HIV drugs should boost sales at the Pharmaceuticals segment. However, lower sales of older respiratory drugs may partially offset the growth.

The company's Pharmaceuticals segment is expected to be driven by solid sales of new HIV products, Tivicay and Triumeq. However, sales of another HIV drug, Epzicom/Kivexa, is likely to decline due to more severe generic competition, particularly affecting the European market.

Notably, the company's latest product from the HIV portfolio, Juluca, has had a strong uptake since its launch in late 2017. Sales in the second quarter were up significantly. Approval of Juluca in EU in May is likely to boost third-quarter sales. Sales of its new respiratory drugs, Ellipta products and Nucala are likely to offset the declines in sales of older respiratory products, namely Seretide, Advair and Avodart. In August, Nucala was approved in Europe for pediatric patients with severe asthma. However in September, the company received a setback when the FDA rejected Nucala's label expansion application for chronic obstructive pulmonary disease. Glaxo's inhaled respiratory products, particularly the older ones, are grappling with persistent competitive and pricing pressure, which are expected to continue through 2018.

Meanwhile, Glaxo's immuno-inflammation drugs like Benlysta are performing well, which is likely to continue this quarter.

The Vaccines segment is likely to consistently benefit from a sustained uptake of Shingrix and Hepatitis vaccines. Although meningitis vaccines like Bexsero and Menveo, acquired from Novartis AG NVS , enjoyed strong demand, supply constraints drove sales lower in the second quarter. We expect demand for these vaccines to remain strong while supply constraints remain a concern.

In Consumer Healthcare segment, while the Power brands should continue to do well, generic competition for Transderm Scop, divestment of Horlicks and MaxiNutrition in the United Kingdom, and the impact of general sales tax in India should hurt segment sales. Oral health and Skin health segments are likely to continue their strong performance.

Earnings Whispers

Our proven model does not conclusively show that Glaxo is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Glaxo has an Earnings ESP of -0.77% because the Most Accurate Estimate is pegged at 86 cents while the Zacks Consensus Estimate is pegged at 87 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Glaxo carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company's negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

GlaxoSmithKline plc Price and EPS Surprise

GlaxoSmithKline plc Price and EPS Surprise | GlaxoSmithKline plc Quote

Stocks to Consider

Here are some large biotech/drug stocks worth considering per our model. These have the right combination of elements to beat on earnings this time around:

Amgen, Inc. AMGN is slated to announce third quarter financial figures on Oct 30. The company has an Earnings ESP of +3.54% and is a Zacks #2 Ranked stock. You can see the complete list of today's Zacks #1 Rank stocks here .

Allergan plc AGN has an Earnings ESP of +3.85% and a Zacks Rank of 3. The company is scheduled to report third-quarter earnings on Oct 30.

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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.


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

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