GSK shares set to slide after admitting Covid will hit 2020 earnings
GlaxoSmithKline shares slumped on Wednesday and could see further losses in the coming months after warning investors that its full-year 2020 earnings are likely to be impacted by the economic fallout from Covid-19.
- GlaxoSmithKline shares slide 3% after lowering earnings guidance in Q3 results
- The pharmaceutical company said that its full-year earnings will be dented by Covid-19
- FTSE 100 returns to April lows as investors pullback amid rising coronavirus cases
GlaxoSmithKline (GSK) shares slumped on Wednesday and could see further losses in the coming months after warning investors that its full-year 2020 earnings are likely to be impacted by the economic fallout from Covid-19.
In its third quarter (Q3) earnings on Wednesday, the pharmaceutical company said that it is on track to deliver full-year adjusted earnings per share (EPS) at the lower end of its guidance range due to its vaccines business taking a hit from the coronavirus pandemic.
GSK is trading at 3% lower on Wednesday to £13.20 per share at the time of publication, with the stock down 25% year-to-date.
GSK expects 2020 earnings to come in at lower end of guidance range
GSK said that it expects adjusted EPS to come in at the lower end of tis guidance range for a decline of between 1% - 4% at constant exchange rates.
However, the company noted that its 2020 guidance was set before the pandemic and, therefore, does not reflect any potential impact on its business from Covid-19 crisis.
‘The Covid-19 pandemic has impacted group performance, particularly in the vaccines business, during the first nine months of 2020,’ the company said.
‘During the third quarter we have seen a recovery in vaccination rates, including adult immunisation rates in the United States returning to prior year levels in the last month of the quarter.’
GSK Q3 earnings: key figures
The pharmaceutical giant revealed that its Q3 pre-tax profit fell to £1.67 billion, down from the £1.95 billion recorded during the same period a year prior.
Revenues meanwhile fell 8% to £8.65 billion, with sales of GSK’s shingles vaccine, Shingrix, tumbling 30% to £374 million.
‘GSK has responded well to a challenging operating environment this year with disciplined cost control and strong commercial momentum in key growth products including Nucala, Trelegy, Benlysta, 2 drug-HIV regimens, Zejula, Shingrix and our priority consumer healthcare brands,’ GSK CEO Emma Walmsley said in a statement.
‘This, combined with improving vaccination rates this quarter, means we are on track to deliver within our earnings guidance range for 2020,’ she added. ‘In addition, we continue to make good progress on our preparations to separate the group and create two new companies - in biopharma and consumer health - which we believe will deliver options for sustainable growth and returns to shareholders.’
GSK will unveil its fourth quarter (Q4) and full-year earnings on 3 February.
FTSE 100: technical analysis
The FTSE 100 is now at its lowest level since late April, and shows no sign of turning higher, according to Chris Beauchamp, chief market analyst at IG.
‘Having broken various support levels to the downside the index now targets 5497 and then 5335,’ he said. ‘Intraday bounces have been cues for more selling, so even a rally today may not be able to provide much bullish momentum.’
How to trade stocks with IG
- Create an IG trading account or log in to your existing account
- Enter ‘GlaxoSmithKline PLC’ in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.