FTSE 100 round-up: what will it take to revive GSK shares?

It’s been another strong quarter for GSK after boss Emma Walmsley upgraded 2023 guidance. So why are shares hardly moved in the FTSE 100 index today?

Hopes that forecast-beating results might finally ignite GSK (LSE:GSK) shares following a year in the doldrums have been dashed by the drag from currency movements.

The FTSE 100 stock added a meagre 9p to 1402p, even though boss Emma Walmsley upgraded 2023 guidance thanks to strong sales in HIV and vaccine categories.

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She also declared a 14p a share dividend for payment on 12 October and continues to back  the overall distribution of 56.5p a share in relation to the 2023 performance.

Walmsley now sees turnover increasing 8-10% this year, up from 6-8% forecast previously, with adjusted earnings per share growth in the range of 14-17% rather than 12-15% and ahead of the 14% City consensus.

But these estimates exclude foreign exchange, which has been negative so far in 2023 due in part to the movement of emerging market currencies against sterling.

Adjusted earnings per share for the second quarter came in 12% above consensus at 38.8p a share, a rise of 16% at constant exchange rates but only 12% higher at actual rates.

Prior to this morning’s stock market opening bell, UBS wrote: “We expect the earnings consensus to move down by about 3% as FX drag more than offsets the guidance increase. We would expect any short-term positive reaction to fade, due to the FX drag.”

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The shares remain a fifth lower than where they were a year ago as sentiment has been impacted by last year’s August’s disclosure of US litigation on heartburn drug Zantac.

The company continues to defend itself vigorously against all the claims, but doing so will take time given that cases in Texas, Illinois, and Florida are not due for trial until 2024 and 2025. The next case in California has been set for trial in November. 

The legal issues have overshadowed the company’s attempts to convince the City of its standalone potential since splitting off consumer healthcare operation Haleon (LSE:HLN).

GSK’s pipeline currently features 68 vaccines and specialty medicines, with 17 in the later stages of development and four anticipated for approval in 2023.

In terms of trading so far this year, UBS said sales growth of 18% in the Shingrix vaccines division to just over £2 billion came in 6% ahead of hopes.

Revenues in general medicines were 7% above expectations and accounted for 40% of the top-line beat, while the HIV portfolio’s sales of £1.58 billion were 5% ahead of consensus.

Walmsley said: “We have delivered another excellent quarter of performance, with strong sales and earnings growth, notably in HIV and vaccines, and continued strengthening of the R&D pipeline and product portfolio.”

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The lacklustre performance of GSK shares came during a largely disappointing session for blue-chip investors as the FTSE 100 index reached lunchtime more than 50 points lower.

Fallers included Rio Tinto (LSE:RIO) after its interim results revealed that shareholders will receive a September interim dividend of 177 US cents a share, down 34% on last year’s award but still equivalent to 50% of earnings at $2.9 billion.

Two years ago, the iron ore giant paid 376 US cents as part of a record dividend year with distributions worth $16.8 billion. Shares fell 125p to 5269p in a session when other blue-chip miners also came under pressure.

British American Tobacco (LSE:BATS) featured on the risers board, lifting 26p to 2660p, after its new chief executive Tadeu Marroco reported a “resilient” performance in the first half of the year.

Adjusted earnings per share rose 5.3% to 181.6p, with Marroco particularly pleased with progress in newer categories after revenues rose 29% to near a breakeven position.

The company, which trades with a yield close to 9%, is due to pay shareholders 57.72p in August as the second of four quarterly instalments in relation to 2022 performance.