We’ve put Pfizer Inc. back on a buy back in May. That’s because it has made progress and is expected to earn more in 2014. The world’s largest drug company remains a buy for long-term share price gains plus attractive and rising dividends. It also gives you a company with no peers in Canada.
In 2013, Pfizer is expected to earn $2.27 a share. That’s up from $2.19 a share last year. Next year the company’s earnings are expected to rise further, to $2.39 a share.
Pfizer’s biggest problem is generic drug competition for Lipitor. In 2013, worldwide sales of its cholesterol drug plunged by 71 per cent. Lipitor sales will likely fall further.
Then again, effective cost controls reduced the impact of lower sales on Pfizer’s earnings. Another plus is strong sales growth in emerging markets. Last year’s sales to these markets grew by 17 per cent. As people’s income rises, they spend more on medicine to treat illnesses. Then, too, sales by its Consumer Healthcare segment increased by 17 per cent.
We expect Pfizer’s drug sales to eventually recover. In the fourth quarter of 2012, it earned double-digit sales growth for drugs such as Lyrica (epilepsy), Celebrex (arthritis pain and inflammation) and Prevnar 13 (vaccine). Pfizer also has other big drugs such as Enbrel (rheumatoid arthritis), Viagra (erectile dysfunction), Xalatan (glaucoma and ocular hypertension), Norvasc (hypertension) and Zyvox (bacterial infections).
What’s more, Pfizer’s new drug pipeline is improving. In November, approval was granted for its Xelijanz pill, a new type of drug to treat rheumatoid arthritis. This was followed up by approval in December for Eliquis, a blood thinner. Each of these two drugs could generate multi-billion-dollar-a-year sales.
One analyst writes, “Encouragingly, the company has reported significant pipeline progress in recent months and, in our view, it is only a matter of time before these products are developed into meaningful top-line [sales] contributors.” A healthy pipeline of new drugs is critical for pharmaceutical companies such as Pfizer. New drugs are needed to replace old ones that come off patent.
Pfizer is back on buy for long-term share price gains plus attractive and rising dividends.
NYSE—PFE; Rating: Very Conservative; Sector: Consumer; Dividend: $0.96; Yield: 3.1%; O/S shares: 7.4 billion; MRI: 4.4; MGI: 0.6; Five-year return: 84%; 52-week range: $31.15—$21.40; Long-term debt-to-cash-flow: 1.6; ROE: 18.4%; Directors own: Under 1%; T: 212-733-2323; www.pfizer.com.