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Gilead Sciences Stock Price Plummet; Dividend Growth is Unsafe

Gilead Sciences Stock Price Plummet; Dividend Growth is Unsafe
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Gilead Sciences (NASDAQ: GILD) stock price slashed to 52-weeks low amid investors’ concerns over slower revenue and earnings growth. Its shares are trading around $62, down significantly from a 52-weeks high of $77 a share. Gilead shares are down 18% in the last twelve months.

Although its dividends are safe, the dividend growth is limited. This is due to the sluggish top and bottom-line financial performance – which has been impacting its cash generation potential.

GILD Gilead Sciences, Inc. weekly Stock Chart

Soft Financials Hinders Gilead Sciences Stock Price

The financial numbers have been impacting Gilead Sciences’ stock price performance over the years. The company’s revenue declined in the past three consecutive years. It has generated revenue of $22 billion in fiscal 2018, down from $26 billion in 2017 and $30 billion in fiscal 2016.

Gilead has generated revenue of $5.6 billion in the second quarter, up only 0.66% from the year-ago period. Its net income improved slightly amid cost cuttings and lower operating expenses. Its Q2 net income stood at $1.9 billion, up from $1.8 billion in the year-ago period.

The company claims that upcoming products are likely to enhance their revenue growth.

I am also very excited about the progress we are making to strengthen our pipeline, including the recently announced Galapagos collaboration, to bring forward our next generation of products,” said Daniel O’Day, Chairman, and Chief Executive Officer, Gilead Sciences.

The company expects to generate annual revenue in the range of $22 billion. This reflects a decline from $22.13 billion in the past year.

Dividend Growth is Limited

Gilead generated $2.2 billion in operating cash flow in the second quarter. It repaid $500 million of debt. The dividend payments stood around $800 million. It repurchased $588 million of outstanding stock during the second quarter.

Thus, the company has limited potential to make a double-digit increase in dividends. Moreover, its future cash flows are unlikely to increase. Overall, Gilead Sciences stock price has limited upside potential. Its dividend growth is also unsafe.

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siraj sarwar

Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.

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