- GSK easily beats estimates for Q3 and raises full-year guidance
- Company continues to respond to US tariff and drug pricing policies
- Buybacks supplement growing dividend
- CEO Dame Emma Walmsley to step down at the end of the year with sales targets for 2031 intact
“A strong third quarter, where revenues and profits easily beat analysts’ forecasts, and another increase to guidance for the top and bottom lines in 2025 as a whole, mean that GSK chief executive Dame Emma Walmsley will be looking to go out on a high note at the medicines and vaccines treatment business as she prepares to hand over to Luke Miels on 1 January,” says AJ Bell investment director Russ Mould.
“She may still be frustrated by GSK’s share price performance during her tenure, given the changes she has made to the company’s structure and strategy, but Dame Emma will still want to argue that the product range and development pipeline are strong enough to carry the FTSE 100 member to her target of £40 billion in sales by 2031, compared to the £31.3 billion generated in 2024.
Source: Company accounts, Marketscreener, consensus analysts' forecasts. *Haleon spun off in 2022. **Management target for 2031.
“Analysts’ forecasts suggest there is still some scepticism regarding that 2031 sales target, even as GSK has 66 drugs at the last count in its development pipeline that are undergoing trial at Phase I, II or III.
“Some analysts continue to suggest that one of Luke Miels’ first actions when he takes over will be to axe the 2031 sales target and focus on a fresh round of cost efficiencies, but the third-quarter results suggest that GSK is gathering momentum, not least because they gave Dame Emma Walmsley the scope to increase guidance for full-year sales, core operating profit and core earnings per share once more, after a series of upward nudges over the past couple of years.
Source: Company accounts
“The way in which growth in Specialty Medicines is compensating for softness in vaccines – an area where US policy may be proving particularly influential and unhelpful at the moment – will likely be of particular satisfaction to management, as GSK continues to focus on drug development in its four core areas of oncology, immunology, HIV and infectious diseases.
Source: Company accounts
“GSK, under the guidance of Luke Miels and the board, will need to keep on gaining regulatory drug approvals and continue to bolster its drug development pipeline, ideally by organic means and research and development, or via acquisitions if necessary. The company has spent more than $10 billion on the purchase of Tesoro, Affinavax, Bellus Health and IDRx.
“A further challenge is American drug and vaccine policies, with regard to both tariffs and pricing. Pfizer and AstraZeneca have both promised to make substantial investments in the USA and GSK has followed suit, with a $30 billion, five-year programme designed to enhance its research and development, manufacturing and supply chain capabilities Stateside, most notably via a new cancer drug facility in Pennsylvania.
“The company’s earnings guidance for 2025 includes the effect of tariffs as it sees them, and shareholders will welcome the upgrades to expectations for sales growth to between 6% and 7%, core operating profit to between 9% and 11%, and core earnings per share to between 10% and 12%.
“Earnings per share will grow faster than core operating profit thanks, in part, to the effects of the ongoing share buyback programme – GSK’s first such scheme since 2013. The company is also targeting an increase in its annual dividend to 64p per share, compared to the 61p payout in 2024.
Source: Company accounts, Marketscreener, consensus analysts' forecasts. Haleon spun off in 2022.
“Adding together the annual dividend and the portion of the £2 billion buyback that is due to fall into 2025, GSK looks set to return nearly £4 billion in cash to its investors this year, or some 6% of the company’s £68 billion stock market capitalisation. Investors are demanding such a lofty sum as compensation for the risks they feel are still associated with GSK’s pipeline, so the company still has work to do if it is to convince that is completely on the right growth track, even if Dame Emma Walmsley’s tenure at the top looks set to finish with a flourish.”
