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Pfizer (PFE Free Pfizer Stock Report), the world's largest drugmaker and a Dow-30 component, reported third-quarter earnings of $0.43 a share, versus $0.31 in the comparable period of 2011. Although the company continued to be hampered by generic deterioration on its cholesterol-fighting drug Lipitor, significant cost reductions over the past twelve months largely helped drive the favorable year-over-year comparison. Adjusted earnings, which exclude items related to acquisitions and one-time charges, came in at $0.53 a share, versus $0.60 last year. In either case, Wall Street seemed relatively unenthused with the announcement, as shares of Pfizer were trading somewhat lower in early morning trading, while the overall market pushed strongly higher.

Sales of Lipitor continued their downward plunge in the third quarter, falling 71%, to $749 million. While this was somewhat expected given the emergence of cheaper generics in the market, the dropoff was slightly greater than anticipated. Besides Lipitor, other key products struggled during the period, with more than two-thirds of Pfizer's medicines posting declines. Pharmaceuticals revenue fell 18%, to $12.1 billion as a result, with four out of the five business segments faring poorly: Primary Care (-39%), Specialty Care (-10%), Emerging Markets (-2%), and Oncology (-1%). Only the Established Products unit, which sells popular but off-patent medicines, saw sales rise (+7%).

Despite lackluster top-line results, management raised its 2012 profit forecast to a range of $1.30 to $1.38 a share, from $1.21 to $1.36, and narrowed its adjusted guidance to $2.14 to $2.17 a share, from $2.12 to $2.22. The company also noted that its Board of Directors has authorized a new $10 billion share repurchase program that is to commence when Pfizer completes the pending sale of its nutrition business to Nestle (NSRGY), which is currently pegged for the first half of 2013.

All told, our investment thesis remains largely unchanged from our last report. Pfizer is a strong company with solid fundamentals and sizable shares in most markets. Although patent expirations on several key products remain a near-term concern, we believe the drugmaker should be able to effectively weather the storm given its impressive track record. With several pipeline prospects showing promise in late-stage studies, we believe it is only a matter of time before these drugs are developed into meaningful top- and bottom-line contributors. For investors seeking a strong total return play with relative stability, Pfizer's stock has an above-average dividend yield and a top rank for Safety (1). The company's Financial Strength (A+) is also outstanding.

About The Company: Pfizer is a major producer of pharmaceuticals, hospital products, consumer products, and animal health lines. Important product names include Norvasc (cardiovascular); Zoloft (antidepressant); Zithromax (antibiotic); Lipitor (cholesterol); Aricept (Alzheimer’s); Cardura (cardiovascular); Diflucan (antifungal); Zyrtec (antihistamine); Viagra (impotence); and Celebrex (rheumatoid arthritis and osteoarthritis). International sales accounted for about 60% of total sales in 2011.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.