Yahoo Finance Pzifer Inc. (PFE) Stock Slips Despite Strong Guidance
Pharmaceutical giant Pfizer Inc. (NYSE: PFE) reported fourth-quarter earnings Tuesday morning, marginally exceeding earnings expectations and meeting expected revenue numbers. And despite issuing better-than-predicted 2018 guidance, PFE stock fell as much as 2 percent in early morning trading.
Heading into the earnings report, Pfizer shares were up 24 percent, matching the gains of the Standard & Poor's 500 index. Here's a closer look at Pfizer's quarter.
[See: 7 of the Best Stocks to Buy for 2018.]
Pfizer earnings: Q4 by the numbers. Earnings per share came in at 62 cents per share, up 32 percent from the year before. Analysts were expecting EPS of 56 cents in the quarter.
Revenue clocked in at $13.7 billion, up 1 percent from a year ago. Wall Street's consensus expectations were for $13.68 billion.
As for guidance, the company projected full-year 2018 EPS of $2.90 to $3 on revenue between $53.5 billion and $55.5 billion. Analysts had been forecasting EPS of $2.78 on revenue of $53.88 billion in the 2018 fiscal year.
Usually, investors are elated by impressive guidance, but PFE stock isn't enjoying the benefit of the doubt Tuesday. Some of that weakness has to do with a soft broader market; in premarket trading, all 30 Dow Jones industrial average stocks were in the red.
Make no mistake; fourth-quarter numbers were solid. If you're a PFE shareholder, you've got no reason to fret.
Hit by HIS. That said, Pfizer's meager revenue growth is due partly to its Q1 2017 sale of the Hospira Infusion Systems (abbreviated as "HIS") business to ICU Medical (ICUI). As a medical device segment, it wasn't quite aligned with what PFE is known for: pharmaceuticals.
While at the time of the sale HIS only accounted for about 3 percent of Pfizer's total revenue, that's 3 percent that literally disappeared from the income statement in perpetuity, so it's clear why that isn't great for revenue comps.
Excluding HIS, revenue grew by 3 percent.
[See: 7 of the Best Blue-Chip Stocks to Buy for 2018.]
The part of that deal that isn't reflected in PFE earnings is that the $1 billion February 2017 HIS sale consisted of $400 million in ICUI stock, accounting for a 16.6 percent ownership stake. That's been great for anyone who owns PFE stock, since ICUI shares are up 71 percent in the last year.
Key drugs, pipeline and other items. Going forward, if the value of the dollar continues to get pummeled -- or even remain near its current three-year lows -- that will be good for Pfizer shareholders. A weak dollar is good for U.S.-based multinationals with large overseas operations; about half of Pfizer's revenue comes from abroad.
Pfizer, which at a market capitalization around $230 billion is one of the 30 most valuable publicly traded companies in the world, has at any given time a handful of drugs that gross upward of $1 billion annually.
Some of PFE's biggest sources of revenue are brands like Lyrica, Eliquis, Ibrance, Enbrel, Xeljanz and Prevnar 13 (its biggest seller), a strep vaccine. Pfizer's also behind well-known drugs like Viagra, Zoloft, Xanax and Lipitor. The company's standout oncology (+11 percent) and biosimilars (+80 percent) businesses are growing impressively.
Of course, PFE's 1 percent revenue growth doesn't make sense if you only highlight its rising stars. The New York-based pharmaceutical powerhouse suffers declining revenue in a number of major legacy drugs. Notably, Viagra revenue plunged by 45 percent as generic competition entered the market in the U.S.
One of the best recent news developments for PFE has been a Phase 3 clinical trial for Reflections, a biosimilar meant to compete against Roche's blockbuster autoimmune drug Rituxan; this is shaping up to potentially be one of Pfizer's next multibillion-dollar products.
Immediate PFE stock movers. Pfizer will be yet another corporate beneficiary of the tax cuts; its adjusted tax rate will slide to just 17 percent in the year ahead, and it anticipates paying $15 billion to Uncle Sam over the coming eight years to repatriate money it holds overseas.
During 2017, Pfizer returned an impressive $12.7 billion to shareholders via share buybacks and dividends. With a dividend yield of 3.5 percent, PFE stock is a tough cookie to beat on yield and should continue to focus on capital reallocation. In fact, Pfizer anticipates $5 billion in stock buybacks in 2018, on top of the normal dividends it pays, which added up to $7.7 billion last year.
Going forward, Pfizer received 10 approvals from the Food and Drug Administration in 2017 -- the best year for approvals in the last decade. That should help strengthen its portfolio in the future.
PFE is also looking to sell off its consumer division, which makes products such as ChapStick and Advil. That way it can focus on the higher-margin pharmaceutical biz.
[See: 7 of the Best Health Care Stocks to Buy for 2018.]
A more concentrated company is almost always a more efficient one, and with Pfizer seeking around a $15 to $20 billion price tag for that business, it should have some extra money to play around with in the year ahead.
Bottom line for PFE stock. PFE stock continues to be a strong blue-chip dividend stock, regardless of what the stock price says Tuesday. There's no reason to lose confidence in the company going forward. In fact, if anything, the company is only getting stronger.
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