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TheStreet Open House

How Will GlaxoSmithKline (GSK) Stock React To Multiple Pressures Facing The Drug Maker?

Stocks in this article: GSK

NEW YORK (TheStreet) -- Shares of GlaxoSmithKline (GSK) are slightly lower in early morning trade as company CEO Andrew Witty faces mounting pressure, the Wall Street Journal reports.

Weak sales, disappointing new drug launches, a profit warning and bribery allegations have helped cause a 15% slump in the drug maker's shares this year, as those of its rivals have gained ground, the Journal said.

Some investors with whom the Journal spoke are starting to question Witty's performance. Their concerns center on the results at the company's U.S. business, and whether claims of bribery in China and other markets could lead to large fines or represent a systemic problem.

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TheStreet Ratings team rates GLAXOSMITHKLINE PLC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate GLAXOSMITHKLINE PLC (GSK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • GLAXOSMITHKLINE PLC's earnings per share declined by 26.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GLAXOSMITHKLINE PLC increased its bottom line by earning $3.68 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($97.65 versus $3.68).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.6%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for GLAXOSMITHKLINE PLC is currently very high, coming in at 70.72%. Regardless of GSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.43% trails the industry average.
  • The share price of GLAXOSMITHKLINE PLC has not done very well: it is down 10.18% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • You can view the full analysis from the report here: GSK Ratings Report

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