AstraZeneca’s latest results fall short of expectations but investors are advised to sit tight

5th February 2015

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Pharmaceutical giant AstraZeneca has narrowly missed City estimates in its fourth quarter market update as it announced revenues fell by 2% to $6.7bn, partly as a result of the appreciating US dollar.

However the core gross margin remained at a decent 80% but 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 just 1% to $26bn while net profit fell by 15% to some $5.4bn.

Following the news, shares in the business fell 2% or 86p to 4,602.00 by 10:28am.

Helal Miah, investment analyst research at The Share Centre said: “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.”

Currently Miah is recommending investors sit tight and ‘hold’ their shares in the firm.

“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,” he added.

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