A Quick Look At GlaxoSmithKline's EPS Forecasts

Published in Company Comment on 17 December 2012

How might earnings at GlaxoSmithKline (LSE: GSK) change in the years to come?

It's always worth keeping an eye on the earnings forecasts for your favourite companies, especially if you use forward price-to-earnings (P/E) ratios to gauge when to buy and sell your shares.

You never know, if City brokers have been revising their projections of late, your investments may not be as cheap -- or expensive -- as you think!

Today I'm looking at the earnings per share (EPS) forecasts for GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US), the FTSE 100 (UKX) pharmaceutical company. All my figures are courtesy of S&P Capital IQ.

The consensus for 2012 is for earnings per share of 112p, which puts the 1,364p shares on a forward P/E ratio of 12.

The estimates also suggest earnings may rise to 119p per share for 2013 and increase further to 132p for 2014.

Earnings may then advance to 145p per share for 2015, then climb to 155p per share for 2016, at least according to City analysts.

The data from S&P Capital IQ also indicates GSK's revenues may only grow at around 3% a year from about £26.7b in 2012 to £30.8b in 2016.

All told, the forecasts aren't great, with revenues essentially predicted to go nowhere between 2012 and 2016. But then again, that P/E of 12 looks like the market is already expecting growth to be subdued.

Whether these projections make GlaxoSmithKline a buy, a hold or a sell is, of course, up to you. To put the company's multiple into perspective, the FTSE 100 at 5,842 trades on a P/E of 11.4.

If you already have GlaxoSmithKline in your portfolio, there are plenty of other great stocks out there to consider, too. Some of them are listed in our special in-depth Motley Fool report "Eight Top Dividend Plays Held By Britain's Super Investor".

The report is completely free and shows where buy-and-hold maestro Neil Woodford believes the best FTSE shares are to be found today. You can download the report by clicking here.

> David owns shares in GlaxoSmithKline.

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