* Higher margins and new drugs help company beat forecasts
* New CEO expected to be named towards end of 2016
* First-quarter core EPS 19.8 pence vs consensus 17.9p
* Q1 sales 6.23 billion pounds vs consensus 6.01 billion
* Shares up 2.7 pct at 1230 GMT (Adds more on CEO succession, analyst comment)
By Ben Hirschler
LONDON, April 27 (Reuters) - Improving margins and growingdemand for new drugs lifted GlaxoSmithKline's underlyingearnings a better-than-expected 14 percent in the first quarter,keeping it on course to achieve a promised return to growth in2016.
The results help vindicate the claims of outgoing ChiefExecutive Andrew Witty that the British drugmaker is on the roadto recovery, with demand for new respiratory and HIV medicinesoffsetting a decline in sales of ageing lung treatment Advair.
Witty, who bows out in March next year, told reporters heexpected a successor to be named towards the end of 2016. Bothinternal and external candidates are being considered and thechoice of new CEO is seen signalling GSK's future direction.
Witty has been under pressure over the last three years asprofits have flagged and some investors have questioned hisfocus on consumer health products, which range from headachepills to toothpaste, leading to calls for a break-up of GSK.
But Wednesday's results suggest GSK is delivering on apledge to stabilise its core pharmaceuticals business and boostprofitability in its non-prescription operation, which wasrecently expanded through a $20 billion three-way asset swapwith Novartis.
"A rebound has started, if measured from the rather deephole that had been dug," said Bernstein analyst Tim Anderson,who rates the shares market-perform.
Consumer profit margins jumped to 17 percent, from 12percent in the previous three months, and Witty said the companycould well achieve its target of 20 percent or more ahead of itscurrent 2020 goal.
Vaccines also did well, helped by some early orders fromgovernments, while Witty predicted the core respiratory medicinebusiness, where GSK is market leader, would grow this year,driven by new drugs like Breo, Anoro and Nucala.
"This puts us on the right track to achieve the expectationswe set out last year, although inevitably, we expect somequarter-to-quarter volatility in reported progress, particularlyin our margins, given the dynamics of our businesses," Wittysaid.
Sales, in sterling terms, rose 11 percent to 6.23 billionpounds ($9.10 billion) in the three months to March, generatingcore earnings per share (EPS) of 19.8 pence, helped by a weakerpound.
Analysts, on average, had forecast sales of 6.01 billionpounds and core EPS, which excludes certain items, of 17.9p,according to Thomson Reuters.
GSK said it expected 10 to 12 percent growth in 2016 coreEPS at constant currencies and confirmed that the dividend, oneof the stock's main attractions with a yield of nearly 6percent, would be held steady through 2017.
Shares in the company traded 2.7 percent higher by 1230 GMTas the FTSE 100 index was up 0.1 percent.
($1 = 0.6846 pounds) (Reporting by Ben Hirschler; Editing by Elaine Hardcastle;Editing by Elaine Hardcastle)
Glaxosmithkline (GSK)
