Eyes Down For GlaxoSmithKline plc’s Results

A preview of GlaxoSmithKline plc (LON:GSK)’s half-year results.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Pharmaceuticals giant GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) is due to announce its half-year results on Wednesday this coming week (24 July).

At the time of writing, the shares of Britain’s biggest drugs group are trading at 1,725p – up a healthy 25% over the last six months compared with a 7% rise for the FTSE 100.

How will GSK have performed in the first half compared with last year’s first half? And will the company be on track to meet analyst consensus forecasts for this year’s key full-year numbers? Here’s your cut-out-and-fill-in table!

  H1 2012 FY 2012 H1 2013 Forecast
FY 2013
Forecast
FY growth
Turnover £13.1bn £26.4bn ? £27.0bn +2%
Core earnings per share (EPS) 53.7p 111.4p* ? 116p +4%
Dividend per share 34p 74p ? 74.5p +1%

* Previously reported as 112.7p. Restated due to a change in International Accounting Standards

Turnover

GSK guided on turnover for 2013 within its annual results for 2012: the board said it expected “turnover growth of around 1%” at constant exchange rates. Management reiterated the guidance within the company’s first-quarter results announced in April.

Based on that 1%-growth guidance, GSK could be expected to turn over £26.7bn for the full year. Current analyst forecasts are a little more optimistic at £27bn, representing growth of 2%.

GSK’s turnover for Q1 this year came in at £6.5bn, down 2% on the same period last year. However, according to consensus estimates from Yahoo Finance, turnover is expected to edge up to £6.6bn for Q2. Therefore, the first-half number to watch for is £13.1bn — the same as last year’s first half.

Earnings

GSK also gave guidance on EPS for 2013 within its annual results for 2012: the board said it expected “core EPS growth of 3-4%” at constant exchange rates from a 2012 restated base of 111.4p. As with turnover, management reiterated the guidance on earnings within the company’s Q1 results. Current analyst forecasts of 116p EPS for the full year (up 4% on last year) are at the top end of the company’s guidance range.

GSK’s EPS for Q1 this year came in at 26.9p, down 6% on the same period last year. Despite analysts expecting turnover to edge up for Q2, consensus estimates from Yahoo Finance have EPS at 26.6p, slightly down on Q1 — but 2% ahead of last year’s Q2. If the analysts are right, we can expect to see H1 EPS of 53.5p within next week’s results — about on a par with the same period last year.

Clearly, on the H1 forecasts, GSK will have to put in an improved performance during H2 to meet both company guidance and analyst expectations for full-year turnover and EPS. It would be a good sign of management confidence if the board reiterates its guidance, so shareholders should keep an eye out for that.

Dividend

At the start of the year, GSK told us it expected to deliver “continued dividend growth” for 2013. The board lifted the Q1 dividend to 18p from 17p, an increase of 6%. As the company is in the habit of paying the same dividend in Q2 as in Q1, shareholders can expect another 18p dividend to be announced next week.

Curiously, given the 6% dividend growth to date, the analyst consensus for the full-year dividend is 74.5p compared with last year’s 74p — less than 1% growth. It would appear the consensus is dragged down by some analysts expecting the full-year dividend to be held at last year’s 74p level.

In what seems to me to be the unlikely event that management lowers full-year guidance on turnover and earnings, and holds the Q2 dividend at 17p instead of the expected rise to 18p, those analysts who are bearish on the full-year dividend could be proved right.

More likely, though, in my opinion, is that the Q2 dividend will be increased to 18p, and that analysts expecting full-year dividend growth of 6% or growth in line with management’s EPS guidance of 3-4% will be closer to the mark.

Finally, let me say that if you already own shares in GSK, and are in the market for more blue-chip shares, you may wish to help yourself to the very latest free Motley Fool report.

You see, the Fool’s top analysts have identified a select group of FTSE 100 companies they believe will generate superior long-term capital and income growth. Such is their conviction about the quality of these businesses that they’ve called the report “5 Shares To Retire On“.

You can download this free report right now — simply click here.

> G A Chester does not own shares in any of the companies mentioned in this article.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

I love my Legal & General shares even more after today’s exciting update

Harvey Jones had high hopes for Legal & General shares when he bought them last year. So far he's got…

Read more »

Jumbo jet preparing to take off on a runway at sunset
Investing Articles

Is easyJet’s share price set to soar after strong 2024 results and upbeat business projections?

After tough years for the airline sector, easyJet’s share price has bounced back and its prospects look good. But how…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Is BP’s 6.7% dividend yield good value after the recent share price fall?

Despite the fluctuating oil price and BP's volatile shares, City analysts predict strong ongoing annual dividend payments ahead.

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Up 42% from their 12-month low, is it time for me to buy this much-fancied FTSE growth stock after a 2% dip?

This FTSE 100 distribution firm achieved a lot in the past year and has good earnings growth prospects, but is…

Read more »

Investing Articles

Here’s the HSBC share price forecast through to 2026

Shares in this FTSE 100 bank have surged in 2024, but what’s next for the HSBC share price? Dr James…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

Can Rolls-Royce shares continue to outperform in 2025?

Stephen Wright thought Rolls-Royce shares were undervalued heading into 2024. After a 90% rally, is this still the case with…

Read more »

Investing Articles

Here’s what Warren Buffett says is ‘always a bad investment’

Working out what to invest in can be difficult. But there’s one asset that Warren Buffett says long-term investors should…

Read more »

Investing Articles

Up 40%! Is it too late for me to grab some shares of this skyrocketing FTSE 100 giant?

With the share price soaring, our writer’s kicking himself for not buying this FTSE 100 share when he reported on…

Read more »