Will GlaxoSmithKline’s dividend survive Emma Walmsley’s first full year report as CEO next Wednesday?
The pharma-giant ended up having an awful 2017. While it managed to hit a an 8 month high of £17.25 in last June, from an opening price of £15.63, the second half of the year was an absolute disaster, with Glaxo crashing towards 26 month nadir of £12.75 by early December. Things had marginally picked up across much of January 2018, keeping it above £13.50, only for it to slip back to a current trading price of £13.02.
While it has been falling since summer, the brunt of its more recent losses stemmed from October’s third quarter report, an update that sparked a near 9% decline across 2 sessions. Thing is, the company’s figures were actually pretty good. Sales were up 4% (2% at constant exchange rates) to £7.8 billion thanks to the company’s new HIV, lung and meningitis products, with adjusted pre-tax profit rising slightly better than forecast 7% to £2.3 billion.
Yet it appears that Walmsley’s suggestion that GSK could bid for Pfizer’s (NYSE:PFE) consumer unit sparked fears that the company’s dividend might be cut to fund a deal, an idea that investors were clearly unreceptive to. Also contributing to the drop was the Pharmaceuticals division’s continued struggles with the Seretide/Advair sales decline, a decline that only wasn’t greater due to the inability of Glaxo’s rivals to get a generic competitor on the market.
How the stock fares following its annual results, then, may well be down to what kind of dividend policy Walmsley reveals on Wednesday. That itself will be informed by whether or not the firm is serious about chasing Pfizer’s potentially $16 billion-costing consumer business, a move that would ease Glaxo’s reliance on its HIV division.
GlaxoSmithKline PLC (LON:GSK) has a consensus rating of ‘Hold’ alongside an average target price of £15.47.
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