Pfizer facing hard times

The share price has had a good run over the last three months, but many of the issues facing the company are yet to be addressed.

A Pfizer worker
Source: Bloomberg

On Tuesday 27 January, before the US equity markets open, Pfizer is due to post its fourth-quarter figures. The company’s adjusted earnings per share are expected to fall from $0.57 down to $0.529; sales are forecast to increase from $12.296 billion up to $12.94 billion, while pre-tax profits are anticipated to jump from $3.587 billion up to $4.587 billion.

At the moment institutional consensus is still supportive of the company, with 17 firms rating it a buy, nine a hold and only one a sell. The average price target for the firm over the next 12 months is $34.38, still leaving a premium as the shares are currently trading at $32.99.

So where is Pfizer at the moment? A number of its drugs have or are about to lose their exclusivity patents, opening up competitors into their markets. The company has cut costs as much as it can and has had to increase its research and development spending in order to keep developing new products.

The dollar has gained strength over 2014, and early signs in 2015 suggest a continuation of this. This is going to eat into the company’s profitability, with over 60% of its revenue coming from outside the US.

All of the above points towards a company that will need to revisit the M&A market after failing to seal a deal with AstraZeneca in 2014. The tax benefits may no longer be there, but the need for fresh exclusivity patents on a range of drugs is required.

Shares over the last three months have performed well but will require a plan of action from the company’s management in order to maintain momentum. Without this, drifting back towards the 200-day moving average and the $30 level seems likely.

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