Equities Update: Taylor Wimpey, GSK, Merck…

Taylor Wimpey’s profits tumble but remains optimistic in housing market turn around

Mark Crouch, Market Analyst at investment platform eToro, says: “Taylor Wimpey has reported a steep fall in profits despite expecting to deliver 9500 to 10000 completions. This marks the upper end of guidance for 2024 so the housebuilder remains optimistic that a turnaround is not far away.

“When higher interest rates threw a spanner in the works for house builders, prospects for the sector looked uncertain. However, demand for housing in the UK still outstrips supply, and with interest rate cuts potentially on the cards, this will likely act as a springboard for Taylor Wimpey.

“A recent driver for the UK house builder is the new Labour government’s ambitious pledges surrounding UK housing targets. Consequently, a wave of optimism has swept through the sector.

“There are lingering concerns though, as higher building costs still hamper progress and have squeezed Taylor Wimpey’s margins. And while cost of living pressures are yet to subside for consumers, should an economic downturn set in, any momentum gathered in recent weeks will almost certainly dissipate.

“Boasting a strong balance sheet with relatively low debt, Taylor Wimpey stands upon sturdy foundations and so is well insulated to absorb any future economic uncertainty should it arise.”

GSK hikes forecasts but issues remain

Adam Vettese, Market Analyst at eToro, says: “For the 2nd time this year pharma giant GSK has raised its sales and profit forecasts with core earnings per share growth in the low double digits. Cancer and HIV drugs performed strongly and helped the firm beat analysts’ expectations. Their pipeline of new drugs is also showing promise with approvals or filings in several key areas.

“Despite what would appear to be a glowing report card, shares have been struggling as of late due to the shadow of litigation about heartburn drug Zantac hanging over the firm. A Delaware judge allowed 70,000 lawsuits to go through in what is undoubtedly a thorn in the side and a huge distraction for GSK. Investors will hope that this will not divert focus away from delivering on the upgraded guidance for the year. Shares are slightly offside this morning and are down 13% since the lawsuit was announced last month.”

Key cancer drug helps Merck beat estimates

 
Mark Crouch, analyst at investment platform eToro, says: “Drugmaker Merck reported for its second-quarter before the opening bell on Wall Street, beating expectations for both its top and bottom line.

“The company’s earnings have been dominated in recent years by Keytruda, a humanised antibody used to treat a wide variety of cancers. If we look back to 2022, Keytruda represented roughly a third of Merck’s sales, and this position has become even more pronounced in the intervening time, with Keytruda now comprising just over a half of all pharmaceutical revenue.

“With Keytruda’s patent set to expire in 2028, a major concern is what Merck has in its pipeline to take its place. Pulmonary hypertension drug Winrevair gained approval from the FDA in the previous quarter, and saw a full launch in the quarter just gone, which CEO Robert Davis describes as a ‘significant milestone’. It is still very early days for Winrevair, though, and while initial sales have been promising, it may take sales data across more quarters for investors to gain confidence in its growth trajectory.

“Merck now expects global sales of $63.4 bn to $64.4 bn for 2024, only a touch higher than its previous estimate, but also lowered its earnings guidance, on account of charges relating to its acquisition of ophthalmology biotech EyeBio. Early response has been negative on Wall Street, with shares in Merck selling off close to 2% in pre-market trading.”