AstraZeneca shares down as Q4 results emerge

AstraZeneca has posted its Q4 and 2014 full year revenues. With a small increase of just 1% in full year sales, and a 15% drop in net profit, shares fell today, prompting comment from analysts.

Helal Miah, investment analyst research at The Share Centre, explained what these mean for investors.

“This morning, AstraZeneca reported revenues in Q4 moderately missed analyst estimates falling by 2% to $6,683m, partly as a result of the appreciating US dollar. The core gross margin remained at a healthy 80% however, the group’s increased focus on R&D and marketing took costs up significantly. This resulted in core earnings per share falling by 38% to $949m. Furthermore, full year sales were up a mere 1% to $26,095m while net profit fell by 15% to $5,396m.

Announced with the results is the news that the firm will acquire the rights to Actavis’ branded respiratory portfolio in the US and Canada.

Miah added: “The company is in a transition phase investing heavily into R&D to boost its drugs pipeline with the hope of mitigating falling sales caused by generic competition. While the increase is promising, this does not guarantee that sales will eventually turnaround and we believe that more evidence of progress is needed. Investors should be aware that even if there is development, it will still be some years before there is a material impact on sales growth.  

“We recommend AstraZeneca as a ‘hold’ for medium risk investors. Like most other major pharmaceuticals, the company will continue to pay a good dividend and we wouldn’t discourage investors attracted by the strong income flows. However, investors should take note that the current p/e ratio of 17x leads us to prefer GSK, which trades at lower multiples. We expect to see results much sooner from GSK, courtesy of investment in R+D being made much earlier.”

Lewis Sturdy, trader at LCG, also said: “It has been a big year for Astrazeneca, never far from the news as they fought off Pfizer and have come out firing in an attempt to shrug off the takeover target moniker, share price has comfortably outperformed the FTSE over the last year and kept a lot of its initial takeover premium.  Q4 revenue just missed expectations whilst FY was up 3%, Core EPS -8% for the FY. Cautious outlook as a number of lucrative drugs have patent expiries ahead of them, but the acquisition of drugs from Actavis announced as part of these numbers continues to show their intent.”