GlaxoSmithKline (GSK) Gains But Lags Market: What You Should Know

Zacks Equity Research

GlaxoSmithKline (GSK) closed at $38.08 in the latest trading session, marking a +1.47% move from the prior day. This move lagged the S&P 500's daily gain of 3.41%. At the same time, the Dow added 3.44%, and the tech-heavy Nasdaq gained 2.58%.

Heading into today, shares of the drug developer had lost 8.51% over the past month, outpacing the Medical sector's loss of 9.37% and the S&P 500's loss of 10.46% in that time.

Investors will be hoping for strength from GSK as it approaches its next earnings release. The company is expected to report EPS of $0.78, down 1.27% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $11.04 billion, up 10.68% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $3.02 per share and revenue of $45 billion, which would represent changes of -4.73% and +4.54%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for GSK. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.6% lower. GSK is holding a Zacks Rank of #3 (Hold) right now.

Digging into valuation, GSK currently has a Forward P/E ratio of 12.43. This valuation marks a discount compared to its industry's average Forward P/E of 13.78.

Meanwhile, GSK's PEG ratio is currently 6.89. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Large Cap Pharmaceuticals was holding an average PEG ratio of 1.77 at yesterday's closing price.

The Large Cap Pharmaceuticals industry is part of the Medical sector. This group has a Zacks Industry Rank of 35, putting it in the top 14% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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