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Market Update

Earnings on Tap: Pfizer

Aggressive cost-cutting plans and an impressive pipeline should help offset patent losses for the Big Pharma firm.

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Pharmaceutical giant  Pfizer (PFE) is due to report first-quarter results Tuesday morning before the markets open. Analysts expect the company to report earnings of $0.55 per share compared with $0.24 per share reported in the corresponding period of the previous year.

Fourth-quarter results topped estimates as sales in emerging markets rebounded and as proceeds from the sale of its nutritional products business to  Nestle (NSRGY) boosted earnings. Year-over-year net income for the quarter came in 4 times higher at $6.32 billion, or $0.86 per share. The company, however, gave a cautious outlook for the year 2013, saying it expected full-year earnings of $2.20-$2.30 per share, excluding special items.

Over the near term, Pfizer continues to face challenges arising from patent losses on several of its blockbuster drugs. However, Morningstar analyst Damien Conover believes Pfizer's operations can withstand the blitz of new generic competition, and the acquisition of Wyeth should help insulate Pfizer from any one particular patent loss. Furthermore, Conover expect billions of dollars of cost cuts, which should buoy earnings growth in the face of major patent losses.

Pfizer's shares have gained nearly 20% since the start of the year and are presently trading near Conover's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.