Ken Fisher (Trades, Portfolio) is a billionaire fund manager managing ~$48 bn worth of equity assets through his investment advisory firm Fisher Asset Management, LLC. The firm uses a combination of top-down macroeconomic research and bottom-up, fundamental stock selection process in order to identify potential candidates for its portfolio. Pfizer, Inc. (PFE) is one of the major holdings of the firm. As of the last quarter, Fisher Asset Management was holding 31,196,415 shares of the company. Here's a look at the company in detail.
Pfizer Inc. is a research-based, global biopharmaceutical company. The company is involved in the discovery, development and manufacture of healthcare products. Its global portfolio includes medicines and vaccines, as well as many of the world’s best-known consumer healthcare products. Pfizer's EPS forecast for the current year is $2.09 and next year is $2.24. According to the consensus estimates, its top line is expected to decline 5.6% in the current year and grow 0.50% next year. It is trading at a forward P/E of 15.29. Out of 21 analysts covering the company, 13 are positive and have buy recommendations, seven have hold ratings, one has a sell recommedation.
The following table shows revenue, EPS and other key metrics of the company over the last couple of years.
Table1: Financial Data of Pfizer, Inc
Source: Gurufocus Value Screens
Last quarter, the company reported revenues of approximately $13.1 billion which reflects a slight operational increase of $9 million year over year. Adjusted diluted EPS was $0.54 versus $0.56 in the year-ago quarter. The decrease was primarily due to a $0.01 negative impact in the foreign exchange and increased R&D expenses due to incremental expenses for the ongoing Phase 3 program of new drug candidates including bococizumab, palbociclib and ertugliflozin.
Pfizer's share price has remained rangebound over the last two years. During the last few years, the company has lost significant revenue due to loss of exclusivity (patent expiry) and co-promote expiries from several high margin products like Lipitor Enbrel in Canada and the US, and the loss of Spiriva. The company was however able to maintain its operating margins by cutting costs. Over the last four years, Pfizer have taken approximately $5.5 billion out of from operating expenses. Management expects these ongoing expense reductions efforts to continue over the next few years.
In order to enhance shareholder returns during this tough period, Pfizer has returned ~64 billion to shareholders with share repurchases and dividends over the last four years. The company expects to return another $13 billion to shareholders in FY2015. Management expects FY2015 revenues will see a negative impact of $3.5 billion from loss of exclusivity on certain products and of $2.8 billion due to adverse changes in foreign exchange. They will be partially offset by nearly $2 billion of anticipated operational revenue growth in certain products like Eliquis, Xeljanz, Prevnar 13 Adult, Trumenba, Inlyta, Xalkori and Nexium 24HR.
Pfizer is trading at 16.39 times it FY2015 EPS. The company has a forward annual dividend yield of 3.40%. In the near term, patent expiry and forex headwind are expected to adversely affect the company's topline growth. However, the real promise for Pfizer's shareholders lies in the strength of its late and mid-stage pipeline, which will help it grow its revenues in the medium term. Meanwhile the company's high dividend yield, cost cutting initiatives, share repurchases and low valuations are expected to provide support to the shares.
