What's In Store For GlaxoSmithKline (GSK) In Q1 Earnings?

GlaxoSmithKline plc (NYSE:GSK) is scheduled to report first-quarter 2017 results on Apr 26 before market opens. Last quarter, the company delivered a positive earnings surprise of 14.04%.

Glaxo’s shares are up 5.7% this year so far, outperforming the 4% increase witnessed by the Zacks classified Large-Cap Pharma industry.

Glaxo’s performance has been pretty good so far, with the company’s earnings beating expectations thrice in the four trailing quarters. Overall, the company has delivered an average positive surprise of 11.03%.

Let’s see how things are shaping up for this quarter.

Factors to Consider

Glaxo should continue to see strong performance at all of its business segments – Pharmaceuticals, Vaccines and Consumer Healthcare in the to-be reported quarter.

Glaxo’s Pharmaceuticals segment is expected to continue being driven by strong sales of new HIV products, Tivicay and Triumeq. Sales of newly launched respiratory drugs, Relvar/Breo, Incruse, Anoro, Arnuity and Nucala are expected to offset the declines in Seretide, Advair and Avodart. Many of Glaxo’s key drugs like Lovaza and Avodart are facing declining sales due to generic competition. Importantly, pricing dynamics and competitive pressure are hurting sales of its top-selling drug Advair. Meanwhile, Advair is anticipated to face generic competition in the U.S this year, which will affect the top line adversely.

The Vaccines segment will benefit from continued uptake of meningitis vaccines, Bexsero and Menveo (acquired from Novartis AG (NYSE:NVS) .

In the past three quarters, Consumer Healthcare saw strong performance across the Oral health and Wellness power brands. The trend is expected to continue in the to-be-reported quarter as well. However, the possible impact of general sales tax and continued slowdown in the nutrition category in India are expected to hurt Consumer Healthcare segment sales this year.

Meanwhile, cost savings from restructuring and continued efficiencies should boost operating profits.

We expect investors to focus on the company’s performance, sales ramp-up of newly launched drugs and pipeline updates on Glaxo’s first-quarter call.

Earnings Whispers

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

Zacks ESP: Both the Most Accurate Estimate as well as the Zacks Consensus Estimate stand at 62 cents. So, the Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Glaxo has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Stocks in the large cap pharmaceuticals sector that have both a positive ESP and a favorable Zacks Rank are:

Celldex Therapeutics, Inc. (NASDAQ:CLDX) has an Earnings ESP of +7.14% and a Zacks Rank #3. The company is expected to release results early next month.

Scheduled to release results on May 2, Gilead Sciences, Inc. (NASDAQ:GILD) has an Earnings ESP of +4.63% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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