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AstraZeneca Projects Double-Digit Growth in Revenue and Earnings

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AstraZeneca, the renowned pharmaceutical company, anticipates a substantial increase in its revenue and core earnings per share in 2024. However, the company recently reported fourth-quarter core earnings per share below expectations due to elevated costs, causing a decline in its stock.

For the three-month period ending on December 31, the Anglo-Swedish group disclosed a core EPS of $1.45. Although this figure reflects growth compared to $1.38 for the same period the previous year, it fell slightly short of the estimated $1.50 per share consensus compiled by the company. Higher research and development expenses, as well as selling, general, and administrative costs primarily attributed to investments in the upcoming launches of drugs Airsupra, Wainua, and Truqap, significantly impacted these earnings. However, a lower tax rate partially offset the decline.

Total revenue for the quarter amounted to $12.02 billion, slightly surpassing expectations of $12.01 billion and demonstrating growth from $11.21 billion in the previous year. Product sales rose to $11.32 billion from $10.80 billion, benefiting from contributions made by rare disease and oncology medicines. This increase in sales helped improve the company’s gross margin, although the effects of profit-sharing agreements somewhat diluted this improvement.

Furthermore, AstraZeneca achieved a net profit of $960 million in comparison to $901 million in the previous year.

Despite being London’s largest company by market capitalization, shares of AstraZeneca experienced a decline of 2.4% to 10,242 pence at 0932 GMT. Analysts explained that the disappointment in the quarterly product mix led to this slide, overshadowing the positive outlook and strong pipeline projected by the company.

AstraZeneca Faces Challenges in Key Growth Drivers

In a recent note to clients, Citi analysts expressed surprise at the weakness in several key growth drivers for pharmaceutical giant AstraZeneca. Despite individual one-time effects on buying patterns, drugs such as Enhertu, Calquence, Tagrisso, and Imfinzi fell short of consensus expectations. This has had a significant impact on the company’s stock performance, making it the biggest faller on the blue-chip FTSE 100 index.

Looking ahead to the coming year, AstraZeneca expects moderate growth in total revenue and core EPS at constant exchange rates. The company predicts a low double-digit to low-teens percentage increase in both metrics. Collaboration revenue, which experienced a substantial 74% rise in the fourth quarter, is also expected to grow further in 2024 due to success-based milestones and anticipated transactions. However, other operating income is projected to decline significantly.

Despite these challenges, AstraZeneca’s Chief Executive, Pascal Soriot, remains optimistic about the future. Soriot believes that continued adoption of their medicines across various geographies will drive strong growth in 2024.

In 2023, AstraZeneca reported total revenue of $45.81 billion, reflecting a 6% year-on-year increase at constant exchange rates. Core EPS also saw an impressive rise of 15% to reach $7.26. These figures surpassed the company’s guidance of mid-single-digit revenue growth and low double-digit to low-teens core EPS growth for the year.

To reward shareholders, the board of directors has declared a second interim dividend of $1.97 per share. This brings the total annual payout to $2.90 per share.

AstraZeneca continues to face challenges in key growth drivers, but remains hopeful for strong growth in the future. The company’s recent financial results exceeded expectations, leading to a generous dividend payout.

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