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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

Looking to trade GlaxoSmithKline and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs and spread bets in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘GlaxoSmithKline PLC’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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