GSK PLC (LSE:GSK, NYSE:GSK) is approaching 18-month highs after the pharma group's boss Emma Walmsley raised the full-year outlook on the back of strong first-quarter results, with analysts saying performances are starting to allay long-held concerns.
The shares rose 2.2% to £17.10 on Wednesday morning, within touching distance of the £17.25 highs earlier this year but still some way from pandemic highs towards £19 and all-time peaks above £20 in the dotcom era.
Revenues beat the average City forecast by 4% and EPS delivered a 16% beat to consensus, analyst Sean Conroy at Shore Capital noted.
The new full-year outlook is for top-line growth toward the upper end of 5-7% range, with Conroy saying that the consensus was "already towards the top-end of this guidance at +4.6%", while new adjusted operating profit guidance of 9-11% compares to the consensus at 6.0% and EPS guidance of 8-10% is well above the 4% consensus.
GSK shares are trading on at roughly 9x 2024 earnings, which the analysts said is "a significant discount to peers" and below the circa-12x the stock has historically commanded.
"We sense that any lingering concerns that might have remained around GSK’s pipeline and its ability to deliver growth have continued to abate."
Derren Nathan, head of equity research at Hargreaves Lansdown, said strong growth in vaccine and speciality medicines drove the double-digit rise in first-quarter sales and a second upgrade of the year.
"Prudent cost management has allowed underlying earnings to rise at a faster rate. But the one cost line GSK has been investing in is R&D.
"That’s pleasing to see given the clinical success emerging from the pipeline. With four positive phase III readouts so far this year the odds of further approvals are on the increase.
"And in the vaccines space applications for additional authorisations for RSV jab Arexvy and Shingles injection Shingrix could help accelerate the uptake of two important products."
Nathan said Zantac litigation is "continuing to cast a shadow" on GSK, with the next update from the key Delaware hearing relating only to the admissibility of evidence "so it could be a while before more clarity emerges".
But, overall he said, "it’s hard to fault ongoing financial and clinical progress"