On Tuesday the drugmaker posted 33 cents first-quarter earnings per share. Analyst Donald Ellis says first-quarter earnings per share missed his 37 cents estimate; he thinks 6 cents came from lower-than-expected selling, general, and administrative costs, and lower R&D. He says the 78% gross margin was 118 basis points below his estimate; the the 36% operating margin were 246 basis points under his estimate; and the 22.9% net margin was 202 basis points below his expectations.
Ellis cited fundamental issues, including an SEC investigation, class action lawsuits, slowing growth, and a minimal R&D pipeline. These problems justify King's discount to peers. He cut the 45 cents second-quarter earnings per share estimate to 36 cents, and cut the $1.86 2003 estimate to $1.55. Ellis also trimmed the $455.4 million second-quarter revenue estimate to $358 million, and cut the $1.78 billion 2003 revenue estimate to $1.49 billion. He's keeping his peer perform rating on the shares.