Good not "good enough" for Astra as stock down despite outlook bump

(Alliance News) - AstraZeneca PLC shares came under pressure, despite stronger earnings and a guidance hike on Thursday.

The Cambridge-based pharmaceutical firm said total revenue in the first half of 2024 surged 15% to USD25.62 billion from USD22.30 billion. Pretax profit jumped 19% to USD5.29 billion from USD4.35 billion.

For the second-quarter alone, revenue climbed 13% USD12.94 billion, and pretax profit was 15% higher at USD2.40 billion.

Half-year earnings per share rose to USD2.65 from USD2.34. In the second quarter EPS climbed to USD1.24 from USD1.17.

AstraZeneca lifted the dividend to USD1.00 from 93 US cents a year ago, growth of 7.5%.

Looking to the full-year, the pharmaceutical firm now expects total revenue and core EPS to grow by a "mid teens percentage" at constant currency, its view upgraded from a previously expected "low double-digit to low teens rise".

However, shares in AstraZeneca fell 3.0% to 11,854.00 pence.

Sometimes "good, just isn't good enough", XTB analyst Kathleen Brooks commented.

"This is usually exactly the kind of earnings report that the market likes: a strong beat on estimates with better-than-expected forward guidance, they also raised their dividend. However, in the current environment, earnings beats are not enough to boost the share price, and Astra Zeneca is falling this morning.

"Its stock is one of the weakest performers in the FTSE 100 and is down more than 2%. The reason for the sell-off seems to be higher than expected costs, which have contributed to lower net income margins," Brooks said.

Brooks suggested Astra's shares were the victim of what is now an increasingly forensic investor.

"The market is scrutinising earnings reports and punishing pockets of weakness," the analyst added.

Nonetheless, Shore Capital Markets took heart from the update. It notes Astra trades at around a 16.6 price to earnings ratio, using the broker's 2025 forecast for the drugmaker.

That puts it at the "upper end of the US and European group", though it adds that the likes of Novo Nordisk AS and Eli Lilly & Co, turbocharged by the weight loss drug craze, skew that comparative.

On Astra, it added the valuation it trades at is still below the 18x forward-looking multiple it has "historically been able to command".

"We continue to believe a premium is warranted based on its earnings growth and pipeline prospects," Shore added.

By Eric Cunha, Alliance News news editor

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