The GSK (LSE: GSK) share price has dropped nearly 12% from its 6 April trading high this year. Since the same point, the FTSE 100 has dropped just over 3%. And during this period, GSKâs closest peer — AstraZeneca â has made a modest gain. This could suggest that there is something amiss with GSK, but I think otherwise.
Overreaction to bad news?
It seems to me that the catalyst to GSKâs share price decline from April was news of possible strikes. These began in May across all six of its main UK sites. The outlook on further industrial action is unclear, and uncertainty is one thing that investors really do not like.
Not helping it either was the approval of a new respiratory syncytial virus (RSV) vaccine for its US rival, Pfizer. The US Food and Drug Administrationâs approval came less than a month after it approved a similar vaccine from the UK firm.
Big new product pipeline
This said, there have been positive developments for it as well in the same timeframe.
On 15 May it saw Teva Pharmaceuticalsâ challenge to a $235m award made to GSK in a patent dispute dismissed. Just three days before, the company also announced promising late-stage data for its meningococcal vaccine.
Overall, it has 68 products pending, and is confident about the potential sales for these new lines.
One key area for it is respiratory medicine, and to this end it bought Bellus Health in early April. It believes the company has a potential world-leading treatment for chronic coughs. And it expects this to be a big seller through to 2031, adding to adjusted EPS from 2027.
Its Shingrix shingles vaccine also continues to perform strongly, generating £833m in revenues in Q1 2023. This compared to consensus analyst expectations of £829m.
GSK also affirmed its earlier guidance for increases in turnover, profit, and earnings per share (EPS) this year. Turnover is expected to rise by 6%-8%, adjusted operating profit by 10%-12%, and adjusted EPS by as much as 12%-15%.
The increases will mainly come from growth in two of its three core business lines. Turnover in Vaccines is expected to increase in the mid-teens percent; Speciality Medicines in mid-to-high single-digits; but turnover in General Medicines should be flat to slightly down.
Healthy dividend yields
The shares came with a dividend yields in 2022 of 3.1%, down from 4% and 4.8% in the two previous years. These are healthy in themselves but look better when compared to rival AstraZenecaâs. These were 2.1%, 2.7%, and 3.1%, respectively.
There are risks for me in the share price, of course. Pharmaceutical companies spend much time and money on product development and if one fails then it is a huge setback. They are also open to legal action against them if products cause problematic side effects. Additionally for GSK, there is the threat of further strikes.
I have maintained unbroken holdings in GSK for many years now and am happy to hold on to them. They have provided me with considerable gains in terms of share price and dividends. If I did not own it, I would buy the stock now to provide me with similar gains over the long term, regardless of short-term setbacks such as strikes.
The post Down 12% since April, the GSK share price fall looks overdone to me appeared first on The Motley Fool UK.
We think earning passive income has never been easier
Do you like the idea of dividend income?
The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?
If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…
Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.
What’s more, today we’re giving away one of these stock picks, absolutely free!
Get your free passive income stock pick
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
4,950 abrdn shares and 716 GSK shares would give me £1,100 annual passive income
3 FTSE 100 stocks I donât think will stay cheap for long
If Iâd invested £5k in GSK shares one year ago hereâs what Iâd have today
I’d buy 886 GSK shares for £500 a year in passive income
3 FTSE 100 and FTSE 250 value stocks Iâd buy right now
Simon Watkins has positions in AstraZeneca Plc and GSK. The Motley Fool UK has recommended GSK. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
