Broker snap: UBS downgrades Glaxo to 'neutral'

28th Aug 2012 09:52

UBS has lowered its recommendation for pharmaceuticals giant GlaxoSmithKline from 'buy' to 'neutral', saying that there's limited potential for further upside.Since January 1st 2011, Glaxo has outperformed the FTSE by 25% and outperformed sector peer AstraZeneca by some 14%."Due to economic sensitivity and other factors, GSK has seen material consensus 2012-2015 EPS [earnings per share] downgrades since FY11 results that have led to one-year forward P/E [price-to-earnings] multiple expansion from 11.1x to 12.5x," the broker said."Given GSK's valuation, and somewhat reduced earnings visibility for the stock, we see less scope for performance versus peers, and thereby downgrade GSK to 'neutral'."UBS has reduced its sales forecasts for Glaxo by 2% and 3% in 2013 and 2016, respectively, and cut its core basic EPS estimate by 3% and 6% "on moderation of pipeline ramp expectations and on conservative modelling of difficult-to-time vaccine franchises".The target price for the stock has been reduced from 1,625p to 1,525p.By 09:51 on Tuesday, shares were trading 0.31% lower at 1,456.5p.BC