Pfizer Earnings Preview: First Quarter 2009

Pfizer [[PFE]] is expected to report their first quarter 2009 results before the market opens on Tuesday, April 28. Based on our analysis, we at are expecting PFE to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $11.14 billion and EPS of $.50. This would represent a 6% decline in revenues from last year’s $11.80 billion in the same period. The current analyst consensus estimates calls for revenues of $11.08 billion and $.49 EPS. On January 26, the company provided full year 2009 revenue guidance of $44 – $46 billion and EPS of $1.85 – $1.95.


We believe that the cost cutting measures that Pfizer has undertaken could produce better than expected first quarter earnings. In January, the main story was Pfizer’s acquisition of Wyeth, but the company also announced at the time that they would eliminate 8,000 jobs and close 5 of its 46 manufacturing plants. The focus on cost management is clearly the right strategy in this environment.


Right now though, the main headwind that Pfizer is facing is not the economic recession, but the strengthening U.S. dollar. The company expects that 2009 revenues could be reduced by $3 billion due to the appreciating U.S. currency. With the majority of their revenues coming from outside of the U.S., the company could face additional headwinds in coming quarters as we expect an economic recovery to begin in the U.S. before reaching other global markets.


Share Performance

Since the beginning of the year, Pfizer’s shares have fallen over 23% which has underperformed the 9% decline in the Dow Jones index. However, in 2008 Pfizer’s shares outperformed the Dow Jones index by falling only 15% (compared to the Dow’s 34% decline).



Shares are now trading at only 6x consensus 2010 EPS estimates. This is a discount to the relative valuations of their peer group. Pfizer’s compelling valuation and 9% dividend yield should be attractive to value investors.


Recommendation: Buy with an $18 price target.


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