The GSK (LSE: GSK) share price gained 3% in early trading Wednesday (30 April), as the pharmaceuticals giant told us it’s “well positioned to respond to the potential financial impact of sector-specific tariffs.”
The assurance came in a first-quarter update, as the company spoke of “mitigation options identified in the supply chain and productivity initiatives.“
The shares had dropped sharply in the days following President Trump’s first tariffs announcement. And even though the price has recovered from that dip, it’s still down 11% year to date.
Specialty Medicines
GSK reported a 2% revenue rise at actual exchange rates (4% at constant rates), driven largely by a 17% rise in sales in its Specialty Medicines division. That helped offset a disappointing 6% fall in vaccine sales, with sales of its Shingrix anti-shingles vaccine down 7%. Core earnings per share (EPS) rose 5%.
After seeing cash generated from operations of £1.3bn, the company announced a dividend of 16p per share for the quarter. Unless something drastic happens, I think we can be reasonably confident of the expected full-year dividend of 64p. On the previous day’s close, that would mean a dividend yield of 4.5%.
On the subject of R&D, CEO Emma Walmsley spoke of “two of the five FDA product approvals expected this year now secured.” The company is preparing for “launches of Blenrep, Nucala and depemokimab, and pivotal trials for potential new medicines in respiratory, oncology, HIV and hepatitis.”
The boss added that all this helps “underpin our confidence in guidance for the year and our longer-term outlooks.”
Investing outlook
For a company like this, it really is long-term drug research and development that makes the difference. A decade or so ago, GSK and rival AstraZeneca were facing losses of blockbuster drug patents with little in the way of replacements on the horizon. It took them a long time to get the pipeline going again. And the dry spell arguably did more short-term damage for shareholders than any of Donald Trump’s tariffs are likely to.
On that score, GSK looks nicely up to strength now. And it really makes me wonder why the share price reflects such an apparently low valuation. We’re looking at a price-to-earnings ratio of under 10 based on current 2025 forecasts. And it could drop to around 8.2 by 2027 if earnings growth expectations come good.
By comparison, AstraZeneca has a forward P/E of 24, dropping to 17, in the same timescale. The predicted GSK dividend yield is twice as high as AstraZeneca’s 2.2% too.
Outlook uncertain
It’s hard to realistically compare valuations like this though, as some drugs can make massively more profits than others. And despite GSK’s bravado, I fear trade war uncertaintly could keep the share price under pressure for some time.
But I rate it as a FTSE 100 company worth considering for investors who are looking further ahead.
