- Q4 sales and earnings ahead of consensus
- 2031 sales target increased
- £2 billion share buyback
GSK (GSK) delivered fourth quarter sales and profit ahead of consensus expectations and raised sales guidance for 2025 as well as nudging up its 2031 target to more than £40 billion and announcing a £2 billion share buyback.
Unsurprisingly, the market reacted positively with the shares topping the FTSE 100 index, gaining more than 5% to £14.60. There have been many false dawns for GSK shareholders, so they will be hoping the gains stick post the mid-morning analysts call.
WHAT DID THE CEO SAY?
Chief executive Emma Walmsley commented: ‘GSK delivered another year of excellent performance in 2024, with strong sales and core profit growth driven by accelerating momentum of our specialty medicines portfolio.
‘This, together with outstanding phase III pipeline progress, means we expect another year of profitable growth in 2025, and have further improved our long-term outlook, with sales of more than £40 billion now expected by 2031.’
Fourth quarter sales increased 4% to £8.12 billion, ahead of the £7.75 billion consensus estimate, driven by double-digit growth in speciality medicines including cancer and HIV drugs.
For the year to 31 December core operating profit was 11% at £9.2 billion higher and EPS (earnings per share) came in ahead of expectations at 159.3p.
RAISED GUIDANCE AND BUYBACK
GSK expects 2025 revenue to grow between 3% and 5% and core operating profit and EPS growth of between 6% and 8%. Consensus estimates are at the lower end of the ranges.
Reflecting ‘significant’ progress in late-stage clinical trials over the last 12-months and ‘multiple’ drug launch opportunities from 2025, GSK increased its 2031 sales target from £38 billion to £40 billion.
The company declared a 16p dividend per share for the final quarter, taking the full year payout to 61p, providing a yield of 4.2% at current prices. In addition, GSK will initiate a £2 billion share buyback programme to be executed over the next year and a half, equivalent to 3.5% of the current market capitalisation.
VACCINES IN FOCUS
Sean Conroy at Shore Capital believes uncertainties around the trajectory of vaccines has weighed on the share price heading into the results.
‘Vaccines is likely to be a key focus, particularly with the looming appointment of RFK Jr. and yesterday’s (4 Feb) commentary from Merck (MRK:NYSE) around the economic slowdown in China impacting the outlook for its vaccines business,’ explained Conroy.
Russ Mould, investment director at AJ Bell also weighed in on the vaccine debate. ‘It’s hard to ignore the lacklustre performance from its vaccines arm. Sales weren’t great in 2024, and they are guided to stay in the sick bed for 2025 with a further decline in turnover.
‘GSK needs to find a way to get back on top with vaccines, otherwise investors are going to lose faith in the business,’ argued Mould.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (Steven Frazer) own shares in AJ Bell.
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