Is A Disappointment In Store For Glaxo's (GSK) Q4 Earnings?

GlaxoSmithKline plc (NYSE:GSK) is scheduled to report fourth-quarter 2019 results on Feb 5, before market open. In the last reported quarter, the company delivered a positive surprise of 14.46%.

Shares of Glaxo have outperformed the industry in the past year. The stock has returned 19.6% compared with the industry’s increase of 10.2%.

Glaxo’s earnings performance has been impressive so far. The company’s earnings surpassed estimates in each of the trailing four quarters by 17.23%, on average.

Factors to Consider

Strong demand for its shingles vaccine Shingrix and respiratory drugs is likely to have driven sales of Glaxo’s Pharmaceuticals segment. However, rising competition in the HIV segment, especially for three-drug regimens, might have hurt sales.

The growth trend in sales of the Respiratory category is likely to have continued in the fourth quarter on the back of strong demand for Trelegy Ellipta and Nucala. Label expansion of Nucala to include children aged six years or older with severe eosinophilic asthma in September might have boosted the drug’s sales in the quarter. However, older respiratory drugs — Advair and Relvar/Breo Ellipta — facing competitive and pricing pressure are likely to have unfavorably impacted Glaxo’s sales in the soon-to-be-reported quarter.

The Vaccines segment is likely to have benefited from the sustained uptake of Shingrix. Moreover, sales of meningitis vaccine Bexsero, acquired from Novartis AG (NYSE:NVS) , have demonstrated growth in the previous three quarters. The trend is likely to have continued in the fourth quarter. However, Menveo sales slightly declined in the prior quarter. Demand for these vaccines fluctuates every season and therefore, sales may vary.

Sales growth of Glaxo’s Benlysta were at record levels in the third quarter. During the fourth quarter, the drug’s label was expanded to include children aged five years or older with lupus in Europe, which may have boosted sales in the quarter. Oncology sales, solely from Zejula, are also likely to have witnessed growth.

Meanwhile, the competitive environment and the shift in the portfolio toward two-drug regimens have likely hurt sales of three-drug regimens — Tivicay and Triumeq — and older HIV drugs. However, the strong growth trend witnessed in two-drug regimens, Juluca and Dovato, might have helped the company to partially offset some of the losses in sales of three-drug regimens.

Glaxo formed a joint venture with Pfizer (NYSE:PFE) in August to create the world’s largest consumer healthcare business. While Glaxo owns a controlling stake of 68% in the JV, Pfizer owns 32%. In the Consumer Healthcare segment, sales are likely to have been driven by Oral health products and Pfizer’s legacy products.

Earnings Whispers

Our proven model does not conclusively show that Glaxo will beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (69 cents) and the Zacks Consensus Estimate (70 cents), stands at -1.55%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Glaxo currently has a Zacks Rank #3.

A Stock to Consider

Here is a large drug/biotech stock you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this season.

Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) has an Earnings ESP of +5.39% and a Zacks Rank #3. The company is scheduled to release fourth-quarter results on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

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