Earnings Miss: GlaxoSmithKline Pharmaceuticals Limited Missed EPS By 48% And Analysts Are Revising Their Forecasts

Last week, you might have seen that GlaxoSmithKline Pharmaceuticals Limited (NSE:GLAXO) released its quarterly result to the market. The early response was not positive, with shares down 2.6% to ₹1,465 in the past week. Results were mixed, with revenues of ₹8.8b exceeding expectations, even as statutory earnings per share (EPS) fell badly short. Earnings were ₹4.51 per share, -48% short of analyst expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for GlaxoSmithKline Pharmaceuticals

Taking into account the latest results, the current consensus from GlaxoSmithKline Pharmaceuticals' seven analysts is for revenues of ₹32.8b in 2021, which would reflect an okay 6.3% increase on its sales over the past 12 months. GlaxoSmithKline Pharmaceuticals is also expected to turn profitable, with statutory earnings of ₹31.49 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of ₹34.2b and earnings per share (EPS) of ₹32.58 in 2021. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.

Despite the cuts to forecast earnings, there was no real change to the ₹1,548 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on GlaxoSmithKline Pharmaceuticals, with the most bullish analyst valuing it at ₹1,799 and the most bearish at ₹1,210 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that GlaxoSmithKline Pharmaceuticals is forecast to grow faster in the future than it has in the past, with revenues expected to grow 6.3%. If achieved, this would be a much better result than the 5.0% annual decline over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 10% per year. Although GlaxoSmithKline Pharmaceuticals' revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at ₹1,548, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on GlaxoSmithKline Pharmaceuticals. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple GlaxoSmithKline Pharmaceuticals analysts - going out to 2023, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for GlaxoSmithKline Pharmaceuticals that you should be aware of.

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