Shore Capital is sticking with its upbeat view on GSK PLC (LSE:GSK, NYSE:GSK), calling the stock “disproportionately discounted” after first-quarter numbers surpassed expectations and guidance was held, despite headwinds from foreign exchange and political noise around drug pricing.
The key beat came on earnings, with core EPS up 5% at constant exchange rates to 44.9p, a full 10% ahead of consensus. That strength was driven by better-than-expected operating leverage, with a 33.7% operating margin topping forecasts by almost 2 percentage points.
ShoreCap notes that this reflects solid execution and gives GSK room to support product launches later in the year without undermining profitability.
Top-line growth was more modest, with sales up 4% at constant exchange rates to £7.51 billion. That included better-than-expected contributions from vaccines, speciality medicines and respiratory drugs.
Although Shingrix (shingles vaccine) declined 7%, the fall was slightly better than feared, and newer vaccines like Arexvy (RSV) should benefit from wider US approval in the second half.
Speciality medicines delivered another strong quarter, led by Benlysta and Nucala, while the HIV franchise held up well despite US pricing reform. Oncology remains one to watch, especially with the potential US reapproval of Blenrep due in July - a catalyst ShoreCap sees as pivotal.
While full-year guidance was reaffirmed, the broker acknowledges that currency headwinds have become more pronounced. FX is now expected to knock 2% off sales and 4% off earnings, prompting ShoreCap to trim its numbers slightly. Even so, it remains ahead of consensus.
Valuation is the clincher. GSK trades on just 7 times expected 2026 earnings, well below peers. ShoreCap's fair value estimate is 2,100p, implying a 12 times multiple; hardly aggressive by sector standards. With execution improving and earnings resilience on show, the case for a rerating is building.
The shares were up 4% at 1,494p.