Pfizer Rises on Earnings Beat

Company lowers annual revenue guidance

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Jul 31, 2018
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Pharmaceutical giant Pfizer Inc. (PFE, Financial) reported strong second-quarter earnings before the opening bell on Tuesday, but disappointed shareholders with a lower revenue forecast for the year.

The New York-based company posted adjusted earnings per share of 81 cents, topping Thomson Reuters’ estimates of 74 cents. Net income increased 26% to $3.87 billion, or 65 cents per share.

Revenue grew 4.4% from the prior-year quarter to $13.47 billion, beating expectations of $13.31 billion. The increase was driven by sales of Xeljanz, Pfizer’s rheumatoid arthritis drug, cholesterol medication Lipitor and pneumonia vaccine Prevnar. In a statement, Chairman and CEO Ian Read mentioned the performance of these drugs was offset by “product losses of exclusivity, a decline in legacy Established Products in developed markets and ongoing legacy Hospira supply shortages.”

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Frank D’Amelio, executive vice president of business operations and chief financial officer, also commented on the company’s performance.

“I am pleased with our results over the first-half of 2018, which keep us on track to deliver a solid financial performance this year,” he said.

As a result, Pfizer raised its adjusted earnings per share guidance for the year to between $2.95 and $3.05. It had previously projected earnings of $2.90 to $3 per share.

Due to a strengthening dollar, however, the company trimmed its annual revenue guidance. It now expects 2018 revenue between $53 billion and $55 billion, down from previous forecasts of $53.5 billion to $55.5 billion.

Restructuring and drug prices

Earlier this month, Pfizer announced it plans to reorganize and create a separate consumer health care business, which it has been trying to sell since last year.

Read commented on the initiative.

“The new structure is a natural evolution of our business as we transition to a period post-2020 where we expect a higher and more sustained revenue growth profile driven by this new structure, the ongoing success of our in-market products, our advancing pipeline and a dramatic reduction in loss of exclusivity impacts,” he said.

According to CNBC, Pfizer promised to delay price increases of about 40 drugs for six months after Read met with President Donald Trump earlier this month. The president criticized Pfizer and other drugmakers for raising prices of several medications on July 1, tweeting that they “should be ashamed” and promising to take action. Since then, other major pharmaceutical companies have followed suit.

Among drug manufacturers, Pfizer is the second-largest company with a 17.2% weight. The largest company, Johnson & Johnson (JNJ, Financial), holds 26.5%. Other top players in the industry are Merck & Co. (MRK, Financial), AbbVie Inc. (ABBV, Financial), Eli Lilly and Co. (LLY, Financial) and Brystol-Myers Squibb Co. (BMY, Financial).

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Stock price

After an initial decline in premarket trading, shares of Pfizer were up 2.38% on Tuesday morning at around $39.51. GuruFocus estimates the stock has gained approximately 8% year to date.

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Disclosure: No positions.