Wednesday, June 4, 2014

How Will GlaxoSmithKline (GSK) Stock React To Settlement of Promotion Claims?

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NEW YORK (TheStreet) -- Shares of GlaxoSmithKline Plc  (GSK) are slightly lower in after-hours trading after it was announced that the U.K. drugmaker will pay $105 million to settle claims by California, New York and over 40 other states that it illegally promoted asthma and antidepressant drugs, Bloomberg reports.

The accord announced today prohibits the company from providing incentive payments to salespeople that encourage uses of the drugs not indicated on their labels, and from using paid doctors to promote its products, Bloomberg said.

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TheStreet Ratings team rates GLAXOSMITHKLINE PLC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation: "We rate GLAXOSMITHKLINE PLC (GSK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income." Highlights from the analysis by TheStreet Ratings Team goes as follows: The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500. GLAXOSMITHKLINE PLC's earnings per share declined by 24.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GLAXOSMITHKLINE PLC increased its bottom line by earning $3.68 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($108.13 versus $3.68). Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.4%. Since the same quarter one year prior, revenues slightly dropped by 5.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share. The gross profit margin for GLAXOSMITHKLINE PLC is rather high; currently it is at 69.50%. Regardless of GSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.84% trails the industry average. In its most recent trading session, GSK has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year. You can view the full analysis from the report here: GSK Ratings Report STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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