GSK is a “buy”, but pharmaceuticals still under pressure says Share Centre

22nd October 2014

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The Share Centre has recommended GlaxoSmithKline as a “buy”,  although the pharmaceuticals sector as a whole sees profits and revenues under pressure.

Graham Spooner, investment research analyst at The Share Centre said that the company’s third quarter results were better than expected.

As a global giant, he said, GlaxoSmithKline’s performance disproportionately impacts the pharmaceuticals and biotechnology sector, accounting for 57% of the sector’s annual revenues, and two thirds of its net profits, so the results are much welcome news.

Spooner added: “This marks a welcome U-turn for the company following a restructuring of management and a new cost cutting programme which has resulted in some much needed market confidence in the company.”

Merger and acquisition talks have bolstered valuations for the sector in 2014, but earnings and sales have been under pressure, and although better than expected, today’s result won’t help, he warne

Pharmaceuticals and Biotechnology companies in the FTSE 350 have seen revenues fall 3.8% compared to a year ago, decreasing by £1.9bn. Earnings have been hit even harder, falling by 11.9% to £8.1bn, according to The Share Centre.

“We continue to recommend GlaxoSmithKline a ‘buy’ for lower risk investors. Despite poor results earlier in the year, today’s announcement shows that the company is still highly rated based on the longer term prospects from their R&D and product pipeline. It also offers investors a level of stability and good levels of dividend income,” said Spooner.

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