Pfizer's Guidance Holding Up Better Than Skeptics Would Guess (PFE)

Pfizer Inc. (NYSE: PFE) has posted earnings that are lower than last year’s results, but were actually above analyst expectations from First Call.  The drug giant posted $0.52 EPS versus $0.47 estimates on $13.1 Billion in revenues versus $12.2 Billion estimates.  It is also guiding 2008 EPS to a range of $2.35 to $2.45 versus a $2.34 consensus estimate.  Pfizer is targeting fiscal 2008 revenues to be between $47 Billion to $49 Billion, while estimates are $47.1 Billion.

As far as the first quarter, there are some exclusivities that won’t be there and the company noted: "First-quarter 2008 revenues may not be comparable to the first-quarter 2007 revenues as a result of the loss of U.S. exclusivity of Norvasc, Camptosar (February 2008) and Zyrtec (January 2008)…..Collectively, these products contributed U.S. revenues of about $1.1 billion in the first-quarter 2007 and $2.7 billion in the full-year 2007. We have considered these factors in our full-year 2008 guidance."

If that revenue number looks much higher than expectations it is partially because of currency, as the strong foreign currencies compared to a weak dollar added roughly 5%.  Part of the reason for the drop in net earnings was a result of its consumer products unit sale. We have noted that Pfizer is a turnaround that hasn’t yet turned around, and that may be starting to change.

Its fiscal earnings per share for 2007 was $1.20 after items. Based on a $22.23 close yesterday, Pfizer now has a trailing P/E of 18.5 (after items) and a forward 2008 P/E ratio of 9.26.  If you look at our comments and targets on the 2008 Dogs of the Dow this new guidance plays into the possibility that Pfizer could end up being one of the surprise sleepers this year.

If you want to know how the restructuring is going, the company trimmed 11,000 jobs last year, closed six manufacturing sites, closed two R&D sites, and is still targeting a $1.5 to $2.0 Billion adjusted cost reduction for 2008 compared to 2006 before the restructuring was implemented.  The company repurchased $10 Billion in stock during 2007 and has another $5 Billion authorized for repurchases.

Jon C. Ogg
January 23, 2008