By Brendan Gilmartin
Pfizer (PFE) is scheduled to report 2Q 2012 earnings before the opening bell on Tuesday, July 31. The shares recently climbed to a multi-year high near $24, the highest level in more than four years. The numbers are typically released at 7:00 a.m. EST and could influence the broader market indices, including the Dow and S&P Index Futures.
Outliers & Strategy
- Earnings Per Share: The value for this measure compares with consensus estimates. The consensus is $0.54, the midway point of analyst forecasts ($0.52 to $0.56). In order for Pfizer shares to push higher in reaction to earnings, look for Adjusted EPS to come in >$0.57. Results tend to closely mirror analyst estimates and a delta of $0.03 would be the minimum needed to push the shares higher. IF earnings were to come in <$0.54, Pfizer faces steep downside risk, given the recent run-up in the shares. (Source: Yahoo! Finance)
- Revenues: Revenues are seen falling 12.3% to $14.9 bln.
- EPS Guidance (FY2012): Look for any updates to the previously issued outlook for $2.14 to $2.24. The consensus is currently at $2.21. After adjusting the outlook last quarter to account for the purchase of Pfizer's nutrition unit by Nestle, the Street looks to be betting on at least a reiteration of this outlook. Based on recent price action and the shares near a 4 ½ year high, many are looking for Pfizer to perhaps raise this outlook.
- Revenues Guidance: Pfizer previously indicated it expects revenues in the range of $58.0 bln to $60.0 bln.
Results from the pharmaceutical space have been mostly positive:
- 07/25: Eli Lilly (LLY): 2Q EPS Adj. EPS of $0.83 vs. Est. $0.77, Raised outlook for 2012. Shares rallied 2.72%.
- 07/25: Bristol-Myers Squibb (BMY): 2Q Adj. EPS & revenues in-line; shares rose modestly.
- 07/27: Merck (MRK): 2Q Adj. EPS and revenues beat forecasts; maintained FY outlook; shares jumped 4.07%.
- 07/23: Bank of America/Merrill Lynch reiterated a Buy rating and a $25 price target on Pfizer, according to a report on Benzinga.com. Ahead of the 2Q earnings conference call, the firm is looking for updated financial results from the sale of the nutrition business and update on the reported spinoff of its Animal Health Business.
- 06/28: Pfizer declared a $0.22 per share dividend on the company's common stock. The yield is now 3.69%.
- 06/07: Pfizer announced the next steps in the strategic alternatives review process for the company's Animal Health business. Pfizer expects to provide details regarding the proposed transaction as part of its 2012 second quarter earnings announcement.
Pfizer shares recently broke through long-term resistance at $23.00 - a level going back to late April. The recent peak of $23.94 (Friday, July 27) also represents the highest since January 2008. Should earnings and guidance surprise to the upside, look for a push toward $25. Conversely, the $23-level now becomes support in the event of a negative surprise, with further downside risk to $22.75, followed by $22.00. (Chart courtesy of StockCharts.com)
Pfizer shares recently broke out to a 4 ½ year high as the company shed non-core assets, expanded its pipeline, and won a series of favorable FDA decisions. The shares are also yielding an attractive 3.69%, trades at just 10.3x forward earnings and 2.7x sales, implying room for additional upside. But with the stock up more than 12% YTD and technical indicators (RSI & MACD) pointed toward overbought conditions, the bar is set pretty high ahead of 2Q results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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