Novice Investing - Rough Revenue Estimation for CNET

Date: Monday 01st 2008f December 2008 03:40:07 PM

Pfizer Doses of Pain - 10/20/2005

By: Novice Investing Staff

The largest pharmaceutical company in the world, Pfizer Inc., reported third quarter earning of 51 cents per share excluding items. Guidance for the year was not that good. Management now expects to earn $ 1.92 - $ 1.94 per share for 2005 versus prior guidance of $ 1.98 per share. The culprit for the quarter seems to be the 44% drop of sales of Celebrex, which has been linked to Vioxx produced by our sample portfolio holding, Merck Co & Inc. (MRK).

Sales for Celebrex tumbled 44% to $ 446 Million for the quarter. What this means is that Pfizer is losing $ 350 M of sales per quarter. You can see why this hurts Pfizer. Extrapolating this figure, Pfizer might lose $ 1.4 Billion of sales annually due to 'Vioxx effect'. Assuming a 15 % net profit margin, this will result in $ 210 Million in profit reduction or 3 cents in EPS. It doesn't sound much but it gives Pfizer a bad reputation of being a 'reliable' performer. As a result, Pfizer stock tumbles 8.6% today to $ 21.90, a fresh 8 years low.

Despite that, Pfizer is not a one-time wonder. It is a behemoth with $ 11.3 Billion of annual profit last year. Contrast that with Merck that earn a 'mere' $ 5.8 Billion. The company is also expected to repatriate close to $ 37 Billion in foreign profits, a mammoth amount, in the coming year. With $ 14 billion currently sitting in the bank, the company can buy, well, pretty much anything it wants. $ 51 billion in cash ! Imagine that.

After the severe drop, Pfizer's stock might be worth a look. A forward P/E of closer to 11 with about $ 1.35 per share of positive net cash. Furthermore, it has no lawsuit liability regarding its celebrex and bextra product line, as of today. Things might change though and therefore investors should keep an eye on these things before investing in Pfizer.

END

For preliminary research, you can browse our collection of annual reports here

You can also view other helpful commentary by clicking here

Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Pfizer Inc. (PFE) or any other securities.

[Resources] [Forum] [Link Partner ] [Novice Investing Directory ] [ Submit Your Article Here ]