Pfizer Beats: Recommended at or Below $18

by: Mike Havrilla posted on: July 23, 2008 | about stocks: PFE    
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Pfizer (PFE) reported 2Q08 revenues of $12.1 billion [B] and adjusted earnings-per-share of $0.55, which were both ahead of consensus analyst estimates for the quarter. The Company also affirmed its full-year revenue ($47B - $49B), earnings ($2.35 - $2.45 per share, adjusted), and cost-savings ($1.5B - $2B) guidance for 2008. Pfizer posted strong results in its animal health segment and brand drug sales for Lyrica, Celebrex, and Sutent. Animal health sales for 2Q08 were $715 million [M], representing an increase of 13% from the year-ago period. Total pharmaceutical sales increased 9% from the year-ago period to $11.1B, including a significant 7% benefit from currency exchange rates due to international sales and a weak US dollar.

The Company also reached an agreement with Indian generic drug maker Ranbaxy to delay a copycat version of the world’s best-selling drug Lipitor in the United States until December 2011. During 2Q08, Pfizer repurchased $500M of its own stock or about 26.4M shares.

Lipitor revenues in 2Q08 were $3B, an increase of 9% compared with the year-ago period and largely due to a 6% currency exchange benefit. Lyrica revenues for the quarter were $614M, posting a robust increase of 52% from the year-ago period and due to growth in managing nerve pain associated with diabetes, nerve pain after shingles, and fibormyalgia. Celebrex revenues for the quarter were $589M, representing an increase of 23% compared with the year-ago period. Sutent revenues for 2Q08 grew by 45% to $211M thanks to strong performance in the treatment of advanced renal cell carcinoma [RCC] and gastrointestinal stromal tumor. The anti-smoking pill Chantix posted sluggish sales growth of just 3% to a level of $207M in the face of recent safety concerns including suicidal/erratic behavior and sleep/dream disturbances, which prompted the Federal Aviation Agency to ban the drug among its pilots.

As I have written previously on Pfizer, I continue to recommend shares of the Company as a turnaround play at or below the $18 per share level, which equates to a dividend yield over 7%. Despite significant patent challenges to Lipitor and other products in Pfizer’s portfolio over the next few years, the Company’s strong balance sheet, marketing muscle, and ability to bolster its pipeline through targeted acquisitions should provide investors with positive returns from current trading levels at multi-year lows which have lagged both the overall market and Healthcare Sector SPDR (XLV) as shown on the chart above.

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This article has 7 comments! Add yours below...

Mike Havrilla

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This article has 7 comments:

  •  
    RPh.
    Jul 23 11:28 AM
    Get in now. The fuse has been ignited.
  •  
    morgan77
    Jul 23 02:36 PM
    Agree with both of you- PFE has a flawless 41-year history of dividend growth and stands to benefit big, along with the entire drug industry as Medicare Part D kicks in over the next few years.
    Here's an article by another PFE supporter if you're interested in the dividend and management.

    www.greenfaucet.com/tr...

    Anyone else have any good information about PFE before I jump in.
  •  
    Football
    Geek
    Jul 23 06:58 PM
    I keep thinking to myself that people who are sick, or use
    viagra would go for quality, and not the "no-name" brands.
    I'm not sure that PFE future is so uncertain, especially with
    that hord of cash they can use to buy back shares,
    look for smaller pharmas who have good options in the
    pipeline, and of course bumping up the dividend.
    People needs drugs, and the boomers are hitting that
    stage in life when they have disposable income, and
    are living longer. Health care, and indirectly drugs are
    a growth area now and in the future.
  •  
    iThinkBig
    Jul 23 07:26 PM
    My Website
    One consideration Morgan. Whom is going to stay in power in Washington? This industry does wonderful with Republicans and horrible with Democrats. At $18, Pfizer has lots of cash, good management and yes, wonderful track record. They have done a lot with moving into DTC marketing to move products which is a plus as physician marketing is under assault. Even if Dems sweep in November in five years it will be solid. Big pharma as a whole is in pattent building mode as many major pattents expired last year or are set to expire this year. Five year cycles occur between clinical trials, FDA approval, product launch probably more like six years this time, growth in 2008 projected at 3%, declining YOY since 2006. I am in Consumer Healthcare Marketing, representing Astra Zeneca and Merck. I hope this helps.

    Jason R.
    CEO
    Prime Health
  •  
    icandoitdon
    Jul 24 01:45 AM
    "Pfizer has lots of cash, good management and yes, wonderful track record."

    the only part of this that's true is PFE has lots of cash. good management? wonderful track record? only if you never held the stock in the last 8 years could you possibly think either. PFE has underperformed every one of the major pharmas (BMY MRK LLY) over the last 10, 5, 4, 3 and 2 years.
  •  
    truthinvesti
    ng
    Jul 24 10:42 AM
    My Website
    If you factor in reinvested dividends ad buy it when the pe is under 14 and avearge down every 10-15% you didfine.I started buying it around 23 and my basis isnow about 19 and my dividend yield is about 7%
  •  
    iThinkBig
    Jul 24 12:21 PM
    My Website
    ICAN: Note my representation, it is Astra Zeneca and Merck. That point should cover debate about past performance. Management winding up with stockpiles of cash to reinvest in new drugs as well as begin a migration into Direct to Consumer Advertising and slashing costs in Physician Marketing is shrewd recent management decisions. I am in this space, it's not how a company winds up in a certain position by 2005, it's the decision making made to correct a situation. Pfizer has filed several major pattents, conducting further M/A's into bio companies and is accutely aware of the political situation of a Democratically controlled House (hostile to big pharma) and is reacting appropriately to it (going into DTC advertising is the example). They are investing overseas for clinical trials. All of these are great management decisions.

    The gentlemen did not ask how they performed prior to 2008, he asked if anyone had an opinion on potential future performance. At $18, you can either wait a few months until after elections which I recommend before buying or buy now. Either way, it is 5-6 year play and PFE has major dough to stick around the market and further become more efficient in-between.
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