Pfizer shares jump after strong quarterly profit, sales

 Pfizer shares jump after strong quarterly profit, sales
Pfizer shares jump after strong quarterly profit, sales

Pharmaceutical giant looks to lift dividend

Aug. 3, 2010, 2:48 p.m. EDT

Pharmaceutical giant looks to lift dividend

By Val Brickates Kennedy, MarketWatch

BOSTON (MarketWatch) -- Pfizer Inc. reported substantially higher second-quarter profit and sales Tuesday, as its performance was fueled by the 2009 takeover of rival drug maker Wyeth and a favorable foreign exchange rate.

Shares of Pfizer jumped 5% to $16.29 in afternoon trading.

New York-based Pfizer /quotes/comstock/13*!pfe/quotes/nls/pfe  (PFE  16.90, -0.28, -1.63%) said it earned $2.48 billion, or 31 cents a share, compared with $2.26 billion, or 34 cents a share, for the same period in 2009.

Pfizer's per-share results were impacted by the expansion of its stock float due to the Wyeth merger. Pfizer's float mushroomed to 8.07 billion shares in the 2010 quarter, up from 6.75 billion shares for the previous year's quarter.

The company also repurchased about $500 million of its stock, or about 31 million shares, during the second quarter.

Excluding various items mostly related to the Wyeth takeover, Pfizer would have reported earnings of 62 cents a share versus 48 cents.

Revenue at the world's largest pharmaceuticals maker jumped 58% to $17.3 billion, largely due to the inclusion of Wyeth product sales. The company added that the foreign exchange rate contributed about 5% to sales.

Pfizer's results handily beat Wall Street estimates. On average, analysts polled by FactSet Research expected the company to earn 52 cents a share on sales of $16.63 billion.

On a conference call with analysts Tuesday, Pfizer management said it is planning to raise its dividend ratio, which was cut in half last year to help fund the Wyeth deal.

They added that they expected the company's board to approve an increase in December.

"While the dividend level remains the decision of the board and continues to be evaluated in the context of future business performance, barring unforeseen events, we currently anticipate board approval of a dividend increase in December and we are now targeting a dividend payout ratio comparable to that of the current industry average of approximately 40% in about three years," said Pfizer Chief Financial Officer Frank D'Amelio.

Pfizer also reaffirmed its 2010 forecast of earnings of 95 cents to $1.10 a share, and adjusted earnings of $2.10 to $2.20 a share. Revenue should come in between $67 billion and $69 billion.

Sales of Pfizer's top-selling product, the blockbuster cholesterol drug Lipitor, rose 5% to $2.81 billion. The pain reliever Lyrica took in sales of $762 million, up 21%.

Late last year, Pfizer acquired rival Wyeth in a deal valued at about $68 billion.

In May, Pfizer said it plans to phase out operations at several of its facilities by the end of 2015 as part of its ongoing restructuring plan in the wake of the Wyeth merger. The phase-outs could result in the elimination of about 6,000 jobs over the next few years.

At the time of that announcement, Pfizer operated 78 plants around the globe. The company had about 113,800 employees worldwide at the end of the first quarter 2010.

Leerink Swann & Co. analyst Seamus Fernandez was upbeat about Pfizer's quarterly report.

"We'd view it as a high-quality result with upside across the P&L with better than expected sales, gross margins, and operating expense management," Fernandez said in emailed comments.

"The top line was bolstered by a better-than-expected foreign exchange contribution, but we estimate that incremental foreign exchange only contributed three cents of the upside versus our forecasts - it wasn't all of the upside," he said.

"All in all, it looks like Pfizer is making progress on the integration and we believe the business unit-based corporate structure is showing signs of improvement," Fernandez added.

Tim Anderson, who tracks Pfizer for Sanford C. Bernstein & Co., said that Pfizer's 2010 results will be helped by increased cost-cutting.

"Pfizer maintained its 2010 financial guidance but says it expects earnings per share to come in at the upper end of the $2.10 to $2.20 range, driven by expenses at the lower end of the guidance range," wrote Anderson in a note.

"If there is any disappointment in the results, it will be that Pfizer did not increase its share buyback or dividend - investors have been pushing for this," Anderson said.

Val Brickates Kennedy is a reporter for MarketWatch in Boston.