Pfizer Earnings Preview: Fourth Quarter 2009

Pfizer [[PFE]] is scheduled to report their fourth quarter 2009 results before the market opens on Wednesday, February 3rd. Based on analysis from EarningsPreviews.com, Pfizer is expected to report better than expected quarterly results that exceed Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $16.40 billion and EPS of $.52. This would represent a 33% increase in revenues from last year’s $12.31 billion in the same period. The current analyst consensus estimates calls for revenues of $15.95 billion and EPS of $.50. On October 20th, Pfizer provided updated full-year guidance that implied Q4 revenue of $15.53 – $16.53 billion and $.47 – $.52 Adjusted Diluted EPS.

 

Earnings Analysis

Pfizer has managed to deliver six consecutive quarters of better than expected earnings results despite declining revenues. Pfizer has mastered the art of delivering bottom line results using strong cost management. We are expecting cost efficiencies following their acquisition of Wyeth to drive another strong quarter for PFE. However, the headline story will likely be stronger than anticipated revenue numbers following the Wyeth acquisition.

 

The acquisition of Wyeth greatly enhances Pfizer’s outlook and helps to offset the company’s faltering organic growth. Pfizer’s stock price has gained 9% since completing the acquisition and the pharmaceutical giant recently increased its dividend and now yields 3.8%. We expect that there will be further cost savings as Pfizer continues to optimize its expense structure in 2010 and believe the company should easily hit Wall Street anticipated double-digit earnings growth in 2010.

 

Stock Performance

In 2009, Pfizer stock eked out a gain of less than 3% as the stock underperformed the Dow Jones industrial average’s 19% increase. Pfizer has consistently underperformed the broader market indexes over the last several years, but finally looks poised to change that trend.

 

Valuation

Pfizer’s stock is now trading at 8x consensus 2010 EPS estimates. This is a discount to the relative valuations of their peer group. With major healthcare reform now looking more unlikely and with the Wyeth acquisition behind them, we look for Pfizer’s stock to trade above $20.

 

Recommendation: Buy with an $23 price target

 

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