Edited highlights below - all sounds solid enough. Looks like AZN is still Citi’s “preferred name” in the secor globally, though I would be more neutral at the current SP…
"Despite the strong quarter and above consensus revenue guidance, 2018 Core EPS guidance may disappoint some investors. We anticipated the increase in SG&A associated with the launch of several new drugs in our recent report … but it appears we may have under-appreciated the near-term negative impact on gross margin, associated with launch of biologics Imfinzi and Fasenra, on top of LOE for mature products. Despite this, we view the revenue outlook as key however. Profitability from both COGS and OPEX will follow, assuming revenue meets or exceeds our expectations.
We underline our confidence in AZN?s c.20% LT Core EPS CAGR outlook (ex externalisation revenues) given the breadth and depth of its small and large molecule pipeline. It remains our global preferred name in the sector. We prefer BUY-rated Bayer in EU. We prefer BUY-rated LLY, BMY and MRK among the US majors.
What’s New? ? AZN reported a strong quarter with notable beats in diabetes (Onglyza, Farxiga), respiratory and Tagrisso leading to a 5% revenue beat. The 62% EPS beat versus consensus for the quarter reflected the contribution from lower R&D (post MRK deal) and a significant contribution from other operating income. AZN reported Core EPS of $1.30 compared with Citi 4Q estimate of $1.17. Guidance for 2018 revenue is slightly ahead of consensus, but the mid-point of EPS guidance ($3.35) is 4% below consensus expectations.
Implications ? Market should overlook near-term margin pressure in 2018, and focus on new products? revenue opportunities…"