Pfizer Beats By 10 Cents a Share

Congratulations to Pfizer (PFE)! They just had a very good earnings report this morning. For the second quarter, PFE earned 62 cents a share which is ten cents more than Wall Street’s consensus.

Pfizer’s revenue increased 58 percent to $17.3 billion, boosted by the addition of Wyeth’s pneumonia vaccine Prevnar and Enbrel rheumatoid arthritis treatment. Pfizer is counting on products gained from the acquisition to help offset losses next year when generic copies of its top-selling Lipitor cholesterol pill enter the market. The New York-based drugmaker also is slashing costs by firing 19,000 employees, closing eight manufacturing plants and shutting six research centers.
“With the acquisition of Wyeth completed during the fourth quarter, Pfizer is now in the initial stages of integrating yet another big pharma company, its third in 10 years,” said Tim Anderson, an analyst with Sanford C. Bernstein & Co., in a July 13 note to clients. “Large amounts of cost-cutting and share repurchases should help keep earnings per share flattish.”

Will this report be enough to get the shares moving? It’s hard to say but it seems like PFE has been stuck in the mud for some time. Pfizer said that it expects earnings-per-share of $2.10 to $2.20 for this year, and $2.25 to $2.35 for 2012.
By any reasonable measure, Pfizer is a cheap stock. The quarterly dividend of 18 cents a share translates to a yield of 4.8%. Yesterday’s closing price of $15.48 gives the stock a forward P/E of around seven.
I was greatly tempted to add Pfizer to this year’s Buy List, but I held off. Despite the low price, I’m wary of Pfizer. The company spent $68 billion acquiring Wyethe and now it’s laying off people left and right. Large-scale mergers make for great press releases but there are often unexpected troubles after a company digests a competitor. On top of that, the highly profitable drug Lipitor goes off patent next year and Pfizer’s new drugs have mostly bombed recently.
Pfizer might be worth a buy soon, but I want to see a few more earnings reports like this one.

Posted by Eddy Elfenbein on August 3rd, 2010 at 9:01 am

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