Markets & Finance

Glaxosmithkline Rises on Strong Results


From Standard & Poor's European MarketScope

Britain

Drugmaker Glaxosmithkline was up £0.79 to £13.20 after the company reported a 4% rise in first-quarter of 2005 sales to £5.036 billion, first-quarter earnings per share up 17% to 21.1 pence, and first-quarter pre-tax profit of £1.711 billion. A MarketScope consensus of five brokers pointed to revenues of £5.008 billion and earnings per share of 19.22 pence. The company said key sales growth drivers included: Seretide, which was up 22% to £690 million; Avandia, up 25% to £287 million; Lamictal, up 30% to £195 million; Valtrex, up 28% to £164 million; and Coreg, up 50% to £135 million. The company added that US sales were impacted by the effect of generic competition to Wellbutrin SR and disruption to the supply of Paxil CR. Earlier, the company said it had reached agreement with the Food and Drug Administration on a consent decree regarding the company's Cidra, Puerto Rico, manufacturing site. The decree provides for an independent expert to review manufacturing processes at the site for compliance with FDA Good Manufacturing Practice requirements. The company also said it expects to begin re-supplying the US and other markets with both Paxil CR and Avandamet in mid-year and said it expects 2005 earnings per share percentage growth in the low double digit range on an International Financial Reporting Standards basis.

Liquor group Allied Domecq was up £0.20 to £6.93, after Lehman Brothers said it sees

further uncertainty surrounding the company after the company announced yesterday that it had received a preliminary approach from a consortium led by Constellation Brands about a potential offer. The broker noted that a preliminary approach from a rival consortium is not a firm bid, but the news gives nevertheless some probability for a competitive bid to emerge for the company. The broker argued that any regulatory delay in Pernod's bid timetable would increase this probability. Meanwhile, the Financial Times reported on Wednesday said a consortium led by the U.S.'s Constellation Brands had approached it to discuss a potential counter-offer for the UK company, which last week agreed to be acquired by France's Pernod Ricard in a £7.5 billion deal. The consortium includes Brown-Forman, the fifth-largest U.S. spirits company, as well as private investment firms Lion Capital and Blackstone.

Mining group BHP Billiton was down £0.22 to £6.24, after the company said that year-to-date production of iron ore, metallurgical coal, manganese ore, manganese alloys, natural gas, aluminium, copper, silver, lead, energy coal and ferrochrome was above the nine months ended March 2004. The company said that third-quarter copper output rose to 249,600 tonnes, 4% higher than March 2004 quarter, while iron ore production was 14% higher to 24.0m tonnes.

Beauty products retailer Body Shop was up £0.26 to £1.91, after the company said that comparable store sales in Britain rose 9% in the first eight weeks of the current year, confounding gloomy figures from other retailers this week. The company also reported fiscal-year operating profit rose 19% to £36.2 million, while earnings per share grew22% to 13.1 pence and announces final dividend of 3.8 pence.

France

STMicroelectronics was down €0.30 and €11.06 after a series of broker downgrades.

ABN Amro cut its target to $18.80 from $25.00, and kept its underweight rating. Cheuvreux lowered its price target to €10 from €12.50, rating the company underperform. UBS downgraded the company to reduce from neutral, trimming its target to €10 from €12. Lehman Brothers cut its target to $13.50 from $15.00, rating the company underweight. The broker said that while cost savings were four times the broker's estimates, the company's results and guidance fall short of expectations. Citigroup cut its target to $15.60 from $17.50 and maintained its hold rating. The broker said it sees no medium-term positive catalyst for the stock. Goldman Sachs said that, while the company's first-quarter results missed guidance and consensus forecast, the most disappointing part of the release was the second-quarter margin guidance.

Food services company Sodexho was up €1.42 to €25.69, after Dresdner Kleinwort Wasserstein upgraded the company to buy from hold and raised its target to €30 from €26. The broker noted that the company has settled its US racial discrimination class action for about €62 million, well below its assumption of €338 million and consensus of €250 million. The brokerage Cheuvreux lifted its target to €24 from €23, and kept its underperform rating. The bank Fideuram Wargny upgraded the company to hold from reduce. UBS lifted its target price to €22.0 from €20.5, and rated the company reduce. Merrill Lynch upgraded the company to buy from neutral and increased its target to €26.70 from €25.40. Earlier, the company agreed to pay $80 million to settle a racial discrimination class action, but admitted no wrongdoing.

Media group Vivendi Universal was up €0.21 to €23.22, after the company reported first quarter sales of €4.761 billion, up 7% on a like-for-like basis, which was better than the expected 4% like-for-like growth. The company also raised its earnings guidance, and said it sees its fiscal-uear 2005 net adjusted income of at least €1.8 billion, and fiscal year 2006 of €2 billion. Separately, the company's incoming CEO Jean-Bernard Levy told the Wall Street Journal Europe that Universal Music unit will remain part of the company.

Liquor group Pernod Ricard was down €4.00 to €117.00, after Allied Domecq said a consortium led by the U.S.'s Constellation Brands had approached it to discuss a potential counter-offer for the UK drinks group, which last week agreed to be acquired by Pernod Ricard in a £7.5 billion deal, the Financial Times reported. Meanwhile, the Times reported that Diageo has entered talks with rival drinks groups with a view to forming a consortium to enter the bidding war. Lehman Brothers said rival bid adds further uncertainty to the company and argues that there is no hurry to buy stock at current levels.

Germany

Deutsche Bank was up €1.05 to €64.70, after the bank reported that first quarter net came in at €1.1 billion, higher than forecasts of €798 million. First-quarter pre-tax profit was €1.8 billion, compared to forecasts of €1.3 billion, and earnings per share were €2.09, up from €1.67 in the period last year.

Drugmaker Altana was down €2.55 to €48.20, after the company reported first-quarter net rose 4% to €94 million, compared to analysts' estimates of €100 million. Sales were up 4% to €741 million, compared to forecasts for sales of €764 million. First-quarter earnings per share were up 5% to €0.70, and first-quarter earnings before interest and taxes came in at €150 million. The company stuck with its 2005 forecasts of sales rising 6% to 8%, and said the first quarter Protonix sales rose 8% to €306 million. The bank Merck Finck said figures of Pantoprazole sales were quite weak with an increase of 8% (it expected 12% due to the previous year's weak first-quarter). The bank said the difference in earnings was mainly due to the chemicals division. In addition, the company restructured the coatings and sealings activities, which burdened earnings.


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