GSK hikes outlook as sales and earning grow faster than expected

GSK PLC significantly outperformed expectations in its third quarter, reporting group revenues of £8.55 billion and core EPS of 55p, driven by robust growth in Specialty Medicines, particularly oncology and HIV, and strong vaccine sales from Shingrix and Arexvy. The pharmaceutical giant also benefited from a substantial reduction in legal expenses year-over-year. Consequently, GSK has raised its full-year guidance, now projecting turnover growth of 6-7%, core operating profit growth of 9-11%, and core EPS growth of 10-12%, signaling increased confidence in its operational execution and product portfolio.

Analysis

GSK PLC reported a robust third quarter, with group revenues reaching £8.55 billion, a 7% year-over-year increase, significantly surpassing the City's average forecast of £8.28 billion. Core EPS also outperformed, coming in at 55p, an 11% rise, well ahead of the 47p consensus estimate. This strong performance was primarily driven by exceptional growth in its Specialty Medicines segment, which saw sales climb 16% to £3.4 billion, notably in oncology (+39%) and HIV medicines (+12%).

The company's profitability was further bolstered by a substantial reduction in legal expenses, leading to a more than doubling of total operating profit and total EPS compared to the prior year, which was impacted by Zantac costs. Core operating profit increased 8% to £3 billion, reflecting not only the strong product sales but also higher royalty income and strategic investment in new drug development within oncology and vaccines. The announced dividend of 16p per share also exceeded predictions by one penny.

Reflecting this strong operational execution and positive momentum, GSK has significantly raised its full-year guidance. Management now anticipates turnover growth of 6-7%, up from the previous 3-5% range, alongside core operating profit growth of 9-11% (previously 6-8%) and core EPS growth of 10-12% (previously 6-8%). This upward revision signals increased confidence in the company's product portfolio and future earnings trajectory.

Key Decisions for Investors

• Investors should closely monitor the sustained growth in GSK's Specialty Medicines and Vaccines segments, particularly the performance of oncology and new RSV jab Arexvy, as these are critical for future revenue and profit expansion.
• The substantial reduction in legal expenses, which significantly boosted Q3 profitability, warrants a re-evaluation of the company's baseline earnings power and long-term financial stability.
• The upward revision of full-year guidance across turnover, core operating profit, and core EPS signals strong management confidence and operational momentum, suggesting a potential re-assessment of investment theses and price targets for GSK.