GlaxoSmithKline plc Beat Analyst Estimates: See What The Consensus Is Forecasting For Next Year

Last week, you might have seen that GlaxoSmithKline plc (LON:GSK) released its yearly result to the market. The early response was not positive, with shares down 4.7% to UK£17.00 in the past week. The result was positive overall - although revenues of UK£34b were in line with what analysts predicted, GlaxoSmithKline surprised by delivering a statutory profit of UK£0.93 per share, modestly greater than expected. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on GlaxoSmithKline after the latest results.

See our latest analysis for GlaxoSmithKline

After the latest results, the 17 analysts covering GlaxoSmithKline are now predicting revenues of UK£35.1b in 2020. If met, this would reflect an okay 4.1% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to rise 6.4% to UK£1.00. In the lead-up to this report, analysts had been modelling revenues of UK£34.7b and earnings per share (EPS) of UK£1.01 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at UK£18.80. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values GlaxoSmithKline at UK£23.00 per share, while the most bearish prices it at UK£15.50. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's pretty clear that analysts expect GlaxoSmithKline's revenue growth will slow down substantially, with revenues next year expected to grow 4.1%, compared to a historical growth rate of 7.8% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 6.8% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than GlaxoSmithKline.

The Bottom Line

The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that GlaxoSmithKline's revenues are expected to perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple GlaxoSmithKline analysts - going out to 2024, and you can see them free on our platform here.

It might also be worth considering whether GlaxoSmithKline's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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