The GSK share price rallied 6% this morning after the company published a surprisingly strong set of full-year results for 2024. Many metrics beat analysts’ expectations, including sales and revenue.
The multinational pharmaceutical and biotechnology company had a tough year, with an extended drop in vaccine sales. However, total sales still rose 8% to £31.4bn, with particularly strong growth in Speciality Medicines (up 19%).
For the full year, core operating profit climbed 11% to £9.1bn and core earnings per share (EPS) rose 10% to 159.3p. Notably, both metrics were down 10% compared to Q4 2023.
The firm announced a Q4 dividend of 16p, bringing the full-year dividend up to 61p. To top it off, a £2bn share buyback programme was announced, to be carried out over the next 18 months.
2025 guidance
CEO Emma Walmsley said: “We expect another year of profitable growth in 2025, and have further improved our long-term outlook, with sales of more than £40bn now expected by 2031.“
She went on to highlight how the company is increasing and prioritising investment in research and development. A focus on new long-acting and speciality medicines was noted, specifically in Respiratory, Immunology & Inflammation, Oncology and HIV. Last year already saw 13 positive phase-three readouts in these areas, strengthening the company’s pipeline progress.
A key driver in today’s price growth was likely the company’s decision to boost forward guidance. It now expects turnover growth in 2025 to be between 3% and 5%, with core operating profit growth of between 6% and 8%. Core EPS is expected to follow a similar pattern, benefiting from share buybacks.
The sales outlook for 2031 has now been increased to more than £40bn (previously £38bn), reflecting late-stage pipeline progress.
Legal and policy issues
A big factor that ate into profits last year was a £2.2bn settlement regarding ongoing Zantac lawsuits. Despite the payment, not all cases are settled and more may still arise. The threat of product-related lawsuits is a constant risk that pharmaceutical companies must navigate.
Another key risk is the proposal by the Trump administration to make Robert F Kennedy Jr. the US health secretary. Based on past comments made by Kennedy, some medical professionals feel he is a vaccine sceptic. With the US as one of its key markets, his influence could hurt the company’s profits.
Signs of a recovery
Shareholders have been losing faith in GSK over the past few years, with the share price leaving little to get excited about. Since early 2020, it’s made two impressive recoveries to £18, only to crash again to £13 soon after.
One of those crashes came in July 2022 after the company demerged from its consumer healthcare business, Haleon. Intended to allow the company to focus on pharmaceuticals, the move shook investor confidence. The shock was further compounded by a 27.8% dividend cut that took the 2022 full-year payment down from 80p to 57.7p per share.
With sales up and the dividend growing once again, this may be early evidence that the decision is paying off. It still faces some challenges but I think today’s results make it a stock worth considering.
