Deutsche Bank expects earnings growth at GlaxoSmithKline (LON:GSK) to remain limited over the next three years, with the blue-chip drugmaker set to invest in its research and development (R&D) productivity. The comments come after GSK recently updated investors on its interim performance, trimming its full-year earnings target.
GSK’s share price has been little changed in London this morning, having lost 0.04 percent to 1,527.00p as of 08:17 BST, as compared with a 0.11-percent dip in the benchmark FTSE 100 index. The group’s shares have lost just under 10 percent of their value over the past year, and are down by a little over two percent in the year-to-date.
Deutsche Bank reiterated its ‘hold’ stance on GSK yesterday, while lowering its price target on the shares from 1,720p to 1,610p. Citywire quoted the broker’s analyst Richard Parkes as explaining that the blue-chip pharmco was “entering a period of reinvestment as it looks to improve its pharma R&D productivity’ that would ‘likely limit 2017-20 earnings per share growth to low single digits”.
The comments come after the FTSE 100 drugmaker updated investors on its performance posting a 12-percent rise in second-quarter turnover, driven by its Pharmaceuticals and Vaccines business.
The analyst added that the group’s results were “a reminder of the benefits of its diversified structure with weaker consumer trends offset by continued strong vaccines performance”.
“However, reinvigorating pharma R&D will not be a quick fix and the company will arguably have to work harder to achieve consensus forecasts and defend margins than investors anticipated,” Parkes pointed out.
The 24 analysts offering 12-month price targets for GSK for the Financial Times have a median target of 1,762.50p on the shares, with a high estimate of 2,100.00p and a low estimate of 1,300.00p. As of August 5, the consensus forecast amongst 30 polled investment analysts covering the blue-chip drugmaker has it that the company will outperform the market.