Pfizer Inc. (PFE) posted fourth quarter 2014 earnings of 54 cents per share, a penny above the Zacks Consensus Estimate but 4% below the year-ago earnings. Revenues, which declined 3% to $13.1 billion, were above the Zacks Consensus Estimate of $12.9 billion.
Full year earnings grew 2% to $2.26 per share. Revenues declined 4% from the year-ago period to $49.6 billion.
The Quarter in Detail
While foreign exchange rates cut Pfizer’s fourth quarter revenues by 3% ($449 million), operational growth was negligible ($9 million). International revenues declined 5% to $8.1 billion. Meanwhile, U.S. revenues declined 1% to $5 billion.
Although the Global Established Pharmaceutical (GEP) segment recorded a decline in revenues again in the fourth quarter, the Global Innovative Pharmaceutical (GIP), Global Oncology, Global Vaccines and Consumer Healthcare segments recorded growth.
The GEP segment recorded an 11% decline in revenues, which came in at $6.4 billion. Factors like the presence of generic competition for Detrol LA in the U.S. and Aricept in Canada and the termination of the Spiriva collaboration in most countries led to the decline in addition to the entry of generic competition for Celebrex. Celebrex revenues plunged 44% in the U.S. However, Lyrica continued to perform well with total sales coming in at $1.4 billion, up 10%.
GIP segment revenues grew 3% to $3.7 billion reflecting the performance of Lyrica in the U.S. and Japan, Xeljanz in the U.S. and Eliquis across the world. This was partially offset by the end of the Enbrel co-promotion agreement.
Consumer Healthcare revenues increased 1% to $953 million. Revenues benefited from the May 2014 launch of Nexium 24HR.
Global Oncology revenues increased 10% to $609 million with performance being driven by Xalkori across the world and Inlyta in most markets. Sutent fared well in the U.S. and emerging markets.
Global Vaccine revenues grew 18% to $1.3 billion. Prevnar 13 was positively impacted by increased uptake among adults thanks to the positive recommendation from the U.S. Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices for use in adults aged 65 and over. This was partially offset by lower revenues from the pediatric indication due to the timing of government purchases compared to the year-ago quarter.
Selling, informational and administrative (SI&A) expenses declined 4% to $3.9 billion during the quarter. R&D expenses increased 14% to $2 billion.
Guidance Falls Short of Expectations
Pfizer expects 2015 earnings of $2.00 – $2.10 per share on revenues of $44.5 billion – $46.5 billion. The Zacks Consensus Estimate for earnings and revenues is currently $2.19 per share and $47.1 billion, respectively.
The company expects loss of exclusivities and unfavorable currency movement to impact revenues by about $3.5 billion and $2.8 billion, respectively. Unfavorable currency movement is expected to impact the bottom line by about 17 cents.
Pfizer expects SI&A spend of $12.8 billion to $13.8 billion and R&D spend of $6.9 billion to $7.4 billion.
Our Take
Although Pfizer’s fourth quarter results were better-than-expected with the company beating on both earnings and revenues despite the presence of generic competition and unfavorable currency movement, the company’s guidance for 2015 fell well short of expectations.
We believe genericization, unfavorable currency movement and the expiration of a few co-promotion agreements will continue to hamper top-line growth. However, cost-cutting efforts and share buybacks should help Pfizer achieve its earnings guidance.
Pfizer is a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the health care sector include Celgene Corp. (CELG), Amgen (AMGN), and AbbVie (ABBV). While Celgene is a Zacks Rank #1 (Strong Buy) stock, Amgen and AbbVie hold a Zacks Rank #2 (Buy).
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