AstraZeneca’s Profitability for 2Q15
AstraZeneca Posts Positive 2Q15 Earnings, Stock Rises
Profitability margins
AstraZeneca’s (AZN) profitability was affected by the ~7% decrease in revenues in 2Q15. Net income fell to $697 million in 2Q15, while the operating profit margin stood at 14.6% of total revenues at $923 million.
AstraZeneca beat analyst estimates for operating income in the last two quarters. Gross profit margin improved by ~2.0% at 81.7% in 2Q15 over 2Q14 due to lower cost of sales. However, operating profit margin fell by ~2.6% to 14.6% in 2Q15 compared to 17.2% in 2Q14. This was due mainly to an increase of more than 2.7% in R&D (research and development) expenses, partially offset by lower SG&A (selling, general, and administrative) expenses.
AstraZeneca’s SG&A expenses went down, since the company has centralized select functions of its officers resulting in substantial economies of scale. AstraZeneca is focused on further lowering its SG&A expenses.
The increase in R&D expenses is due to increased investments in late-stage development products.
Dividends and splits
Total dividends paid to shareholders in the current year up to 2Q15 were $2,357 million, partially offset by the issue of shares worth $20 million due to the exercise of a stock option. The company paid a cash dividend of $0.95 per share in February 2015. The company has declared an interim cash dividend of $0.45 per share, a post-split share, on July 30, 2015. AstraZeneca’s total dividend yield year-to-date is 4.14%.
AstraZeneca split its stock in a 2:1 ratio effective July 27, 2015. In August 1998, AstraZeneca stock was split in a 3:1 ratio. The face value of stock gets lowered after the stock split, thereby increasing the number of shares in the market. This improves the liquidity of the stock and also helps in better price discovery of the stock.
The dividend yield year-to-date is 2.84% for Johnson & Johnson (JNJ), 3.04% for Merck & Co. (MRK), and 5.85% for GlaxoSmithKline (GSK). The Health Care Select Sector SPDR ETF’s (XLV) return year-to-date was 12.04% on its price.
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