http://www.istockanalyst.com/finance/story/5025854/should-you-invest-in-pfizer-inc-nyse-pfe
Since announcing an 11% hike in quarterly dividend on December 13, 2011, the share price of Pfizer (PFE: 20.18, 0.3) has gained $3.15 to close yesterday's trading at $20.34. That price gain is also attributable to other factors including – one, analysts' consensus beating Q4-2010 results; two, announcement of plans to rationalize manufacturing plants and aggressive cost cutting; three announcement of a $5 billion share buyback, on top of an existing $4 billion from a prior program; four, the acquisition of Synbiotics Corporation and King Pharmaceuticals, Inc. (NYSE: KG: 14.24, 0); and, five, agreement to acquire Ferrosan's consumer healthcare business. Currently, analysts' consensus one year target is at $23, compared to the 52 week high of $20.57 – should you now invest in Pfizer?
Dividend Hike
Pfizer had a fantastic string (40 years run) of dividend increases going before knocking its quarterly payout down from $0.32 in 2008 to $0.16 per share in 2009. The company resumed dividend hike ($0.16 to $0.18) in 2010 and as was widely expected announced another dividend hike for 2011 ($0.18 to $0.2).
Q4-2010 and forward earnings view
For Q4-2010, the company's reported EPS of $0.47, exceeded analysts' consensus estimate of $0.46 by 2.17%. For Q1-2011, analysts' EPS estimates range from a low of $0.53 to a high of $0.62. This compares to analysts' consensus estimate of $0.58 and Q1-2010 EPS of $0.6. For the fiscal quarter ending March 2011, the consensus EPS forecast has remained the same over the past week at $0.580 and remained the same over the past month at $0.580. Of the 2 analysts making quarterly forecasts, 2 raised and none lowered their forecast. For the fiscal year ending December 2011, the consensus EPS forecast has remained the same over the past week at $2.230 and remained the same over the past month at $2.230. Over the next five years, the analysts that follow this company are expecting it to grow earnings at an average annual rate of 3.0%.
Based on its earnings views, the company intends to reach a payout ratio of 40% within the next few years.
Plant rationalizations
In 2009, Pfizer indicated it would close six of its twenty R&D global facilities as it rationalized its operations and cut costs. At the same time, the company was bulking up its Shanghai R&D operation. Pfizer opened its Shanghai R&D Center in 2005 and has been steadily been adding staff since then. Pfizer had previously announced it would close the Groton lab. To this effect, recently the company initiated the closure of the Groton lab. The switch will be gradual, according to Pfizer.
Some researchers will remain at their present facility for up to two years, seeing their projects through to completion and also allowing Pfizer time to complete construction on its Shanghai lab. Besides the cost advantage of doing drug research in China and the talent available there, ex-Pfizer executives commented that a Shanghai facility helps gain favor with the SFDA, which comes in handy when a company like Pfizer seeks China approval for its drugs.
Recently Pfizer Inc. announced that it is finalizing plans to vacate its 91,500-square-foot facility at 620 Memorial Drive in Cambridge and put the rehabilitated laboratory and office building up for sale.
Plant rationalizations are earnings positive in the short term but could turn out to be earnings negative in the long term. However, I think, Pfizer has initiated steps to counter that long term view. A case in proof is Pfizer's recent collaboration with Apple Computer (AAPL) to create a business around scientific content that adds a whole new dimension.
Share buyback
As of December 31, 2010, Pfizer had repurchased approximately 60 million shares under the current repurchase program. Pfizer currently expects to repurchase approximately $5 billion of its common stock during 2011 with the remaining authorized amount available in 2012 and beyond. Though the share buyback announcement is a key positive for boosting the company's share price, retail investors may not get much benefit as insiders and institutional holders have been actively selling their shares.
Rumor mills
Rumor mills are agog with the speculation of Pfizer's break-up into five or six companies. According to Bernstein analyst Tim Anderson, Pfizer's CEO Ian Read is weighing a split. The split could involve separation of Pfizer's consumer, animal-health and infant-formula businesses. Pfizer didn't comment, other than to point to a statement it released February 1, saying it expects to complete a review of its business portfolio this year. If Pfizer breaks-up then that indeed would be a shareholder wealth positive.
Net on net
Currently, the shares of Pfizer meet all the criteria for stock selection as propounded by the legend James P. O'Shaughnessy. PFE's current stock price ($20.38) is within 15% of the 52-week high ($20.5). I think, Pfizer is good stock to take a position at current levels whether you are a speculator or an investor.
Since announcing an 11% hike in quarterly dividend on December 13, 2011, the share price of Pfizer (PFE: 20.18, 0.3) has gained $3.15 to close yesterday's trading at $20.34. That price gain is also attributable to other factors including – one, analysts' consensus beating Q4-2010 results; two, announcement of plans to rationalize manufacturing plants and aggressive cost cutting; three announcement of a $5 billion share buyback, on top of an existing $4 billion from a prior program; four, the acquisition of Synbiotics Corporation and King Pharmaceuticals, Inc. (NYSE: KG: 14.24, 0); and, five, agreement to acquire Ferrosan's consumer healthcare business. Currently, analysts' consensus one year target is at $23, compared to the 52 week high of $20.57 – should you now invest in Pfizer?
Dividend Hike
Pfizer had a fantastic string (40 years run) of dividend increases going before knocking its quarterly payout down from $0.32 in 2008 to $0.16 per share in 2009. The company resumed dividend hike ($0.16 to $0.18) in 2010 and as was widely expected announced another dividend hike for 2011 ($0.18 to $0.2).
Q4-2010 and forward earnings view
For Q4-2010, the company's reported EPS of $0.47, exceeded analysts' consensus estimate of $0.46 by 2.17%. For Q1-2011, analysts' EPS estimates range from a low of $0.53 to a high of $0.62. This compares to analysts' consensus estimate of $0.58 and Q1-2010 EPS of $0.6. For the fiscal quarter ending March 2011, the consensus EPS forecast has remained the same over the past week at $0.580 and remained the same over the past month at $0.580. Of the 2 analysts making quarterly forecasts, 2 raised and none lowered their forecast. For the fiscal year ending December 2011, the consensus EPS forecast has remained the same over the past week at $2.230 and remained the same over the past month at $2.230. Over the next five years, the analysts that follow this company are expecting it to grow earnings at an average annual rate of 3.0%.
Based on its earnings views, the company intends to reach a payout ratio of 40% within the next few years.
Plant rationalizations
In 2009, Pfizer indicated it would close six of its twenty R&D global facilities as it rationalized its operations and cut costs. At the same time, the company was bulking up its Shanghai R&D operation. Pfizer opened its Shanghai R&D Center in 2005 and has been steadily been adding staff since then. Pfizer had previously announced it would close the Groton lab. To this effect, recently the company initiated the closure of the Groton lab. The switch will be gradual, according to Pfizer.
Some researchers will remain at their present facility for up to two years, seeing their projects through to completion and also allowing Pfizer time to complete construction on its Shanghai lab. Besides the cost advantage of doing drug research in China and the talent available there, ex-Pfizer executives commented that a Shanghai facility helps gain favor with the SFDA, which comes in handy when a company like Pfizer seeks China approval for its drugs.
Recently Pfizer Inc. announced that it is finalizing plans to vacate its 91,500-square-foot facility at 620 Memorial Drive in Cambridge and put the rehabilitated laboratory and office building up for sale.
Plant rationalizations are earnings positive in the short term but could turn out to be earnings negative in the long term. However, I think, Pfizer has initiated steps to counter that long term view. A case in proof is Pfizer's recent collaboration with Apple Computer (AAPL) to create a business around scientific content that adds a whole new dimension.
Share buyback
As of December 31, 2010, Pfizer had repurchased approximately 60 million shares under the current repurchase program. Pfizer currently expects to repurchase approximately $5 billion of its common stock during 2011 with the remaining authorized amount available in 2012 and beyond. Though the share buyback announcement is a key positive for boosting the company's share price, retail investors may not get much benefit as insiders and institutional holders have been actively selling their shares.
Rumor mills
Rumor mills are agog with the speculation of Pfizer's break-up into five or six companies. According to Bernstein analyst Tim Anderson, Pfizer's CEO Ian Read is weighing a split. The split could involve separation of Pfizer's consumer, animal-health and infant-formula businesses. Pfizer didn't comment, other than to point to a statement it released February 1, saying it expects to complete a review of its business portfolio this year. If Pfizer breaks-up then that indeed would be a shareholder wealth positive.
Net on net
Currently, the shares of Pfizer meet all the criteria for stock selection as propounded by the legend James P. O'Shaughnessy. PFE's current stock price ($20.38) is within 15% of the 52-week high ($20.5). I think, Pfizer is good stock to take a position at current levels whether you are a speculator or an investor.