AstraZeneca: Results Preview

LONDON -- Blue-chip pharma group AstraZeneca  (LSE: AZN  ) (NYSE: AZN  ) is due to announce its annual results on Jan. 31.

At the time of writing, the shares of this FTSE 100 Anglo-Swedish group are trading at 3,080 pence -- little changed from a year ago against a rising market.

How will AstraZeneca's businesses have performed in 2012 compared with last year? Here's your cut-out-and-check results table!

  FY 2011 Forecast FY 2012 Forecast FY growth
Revenue $33.59 billion $28.10 billion -16.3%
Core earnings per share $7.28 $6 to $6.30 -15.5% (mid)
Dividend per share $2.8 $2.9 +3.6%

Pascal's plans
We haven't heard too much yet from AstraZeneca's new chief executive, Pascal Soriot, who took up his duties on Oct. 1 of last year. Commenting on his appointment, Soriot said: "My priority is to restore the company to growth and scientific leadership."

Poached from Swiss rival Roche, Soriot is known as an innovator and deal-maker. His first act as Astra's chief executive was to suspend the company's share buyback program in order to maintain financial "flexibility" -- useful for a deal-maker. He has also made sweeping changes to the executive management team structure and personnel, including the creation of three senior research and development roles, showing his commitment to innovation.

The upcoming results will give Soriot the first proper opportunity to tell shareholders about his plans for the company.

Revenues
The forecast revenue numbers largely reflect the ongoing impact from the loss of exclusivity for a number of Astra's brands in key markets.

In Q3, revenues in Western Europe were down 20%, with loss of exclusivity on Seroquel IR, Atacand, Nexium, and Merrem accounting for 70% of the decline. In the U.S., revenues were down 19% due to the impact of health care reform and the loss of exclusivity on Seroquel IR. In other developed markets, revenues were down 18%, largely due to a 43% decline in Canada as a result of generic competition for Crestor and Atacand.

The picture was brighter in emerging markets, where revenues increased 6%, including rises of 23% in both China and Russia. However, there were also some gloomier spots -- notably Mexico, where challenging conditions knocked as much as 2% off the total emerging-markets revenue growth.

CEO Soriot has his work cut out, but the market already knows that. Restoring the company to growth won't happen overnight. Analysts are forecasting Astra's total revenues for 2012 to be $28.1 billion (down 16%). Revenues for the first nine months were $20.7 billion (down 17%), so look out for Q4 revenues of $7.4 billion.

Earnings and dividend
Astra has guided on EPS for 2012 to be in the range of $6 to $6.30. A result at the lower end of the range would represent a decline of around 18%; a result at the top end, a decline of around 13%.

At the moment, Astra has "a progressive dividend policy, intending to maintain or grow the dividend each year." As Soriot has already changed one aspect of shareholder returns -- share buybacks -- keep an eye on whether there's any change to the dividend policy.

As things stand, analysts are forecasting a dividend of around $2.9 a share for 2012. The company has already paid an interim of $0.9, so look out for a $2 payout in the coming results. If analyst dividend forecasts are on the button, the annual increase -- 3.6% -- will be lower than shareholders have become accustomed to.

Pessimism in the price
We all know Astra's revenues and earnings are going to be poor for 2012 and I wouldn't expect to see the shares move much, either way, if EPS are within the range the company has guided on. I think the chief executives words and guidance on 2013 will be much more significant for investor sentiment.

There is a good deal of pessimism in Astra's rating. Translating the EPS and dividend forecasts into sterling give a price-to-earnings ratio of little more than 8 and a dividend yield pushing 6%. That's the kind of valuation that will always interest contrarian investors.

I can tell you that one of the U.K.'s most successful contrarians is backing Astra to the hilt. City supremo Neil Woodford's 20 billion pound funds have thrashed the FTSE 100 over the past five, 10 and 15 years, and this master investor has made Astra his biggest holding with a high-conviction weighting of 9%.

If you're interested in discovering Woodford's other big blue-chip bets and gaining a valuable insight into his enormously successful approach to investing, I recommend you download the exclusive free Motley Fool report, "8 Shares Held By Britain's Super Investor."

This free report is available to private investors for a limited time only, but you can download it right now: simply click here.


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