Pfizer (PFE - Free Pfizer Stock Report), a leading drugmaker, has reported second-quarter earnings of $0.33 a share, surpassing our estimate of $0.32 and up 6% from the year-earlier period ($0.31). Lower taxes and reduced restructuring charges from its 2009 acquisition of Wyeth helped offset a modest decline in sales. Nonetheless, the stock declined modestly on the news.

Revenue during the period totaled $16.98 billion, down from $17.33 billion the year before. Increased generic competition on a few of the company's key products weighed heavily on the top line. Despite this, growth in emerging markets was strong, and management indicated it would continue to invest in this segment.

During the second half of the year, the company's pipeline will be a key focus as it prepares to lose exclusivity rights for its top-selling drug, Lipitor, in November. Encouragingly, Pfizer has three experimental medicines that have shown promise in late-stage studies. Although their contributions will probably be less meaningful in the near term, projections indicate they could bring in more than $3.5 billion in annual revenue by 2015. In the meantime, management will likely trim the workforce and divest certain business units to help offset declining sales.

Also noteworthy, management reiterated its intention to buy back between $5 billion and $7 billion worth of its shares in 2011. Pfizer returned $3.8 billion to shareholders in the second quarter, $1.6 billion in the form of dividends and $2.2 billion in the form of share repurchases. Year to date, the company has repurchased $4.3 billion worth of its stock.

All told, we are maintaining our 2011 share-net estimate of $1.15, reflecting year-over-year growth of about 12%. In our view, Pfizer remains a strong company with solid fundamentals and a good market position. Over the long haul, we believe it will be able to effectively weather the impact of upcoming patent losses. Conservative investors may find interest in the stock's high scores for Safety and Price Stability, as well as its low Beta and generous dividend yield.

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 57% of total sales in 2010.


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