Pfizer's New CEO Should Consider Buybacks, Divestitures to Increase Value

Pfizer PFE CEO Ian Read has his hands full, as Pfizer looks for ways to increase its stock's value with patents set to expire on many of its key drugs. Buybacks and asset divestitures are a couple of options for ways to enhance the value of Pfizer stock. Pfizer has begun buying back stock in its company, but the buybacks have been minimal at best reaching $1 mil for 2010. According to a recent Barron's article, "A more aggressive buyback of $5 billion to $6 billion annually in the next five years could lift the company's profit to more than $2.60 a share by 2015, speculates one shareholder. An even bigger buyback program of $8 billion to $9 billion annually could lift profit to almost $2.90 a share by 2015." Another idea that Pfizer may consider is asset divestiture. Barron's reports, "Pfizer might spin off or sell some higher-value businesses, including animal health, consumer health and infant nutritionals. These businesses command a premium valuation of at least 15 times earnings, about double Pfizer's current P/E. By selling or splitting them off, Pfizer could retire a significant number of shares. These divisions could be valued at $27 billion, or some 20% of Pfizer's market value of $135 billion." Ian Read took over as CEO of Pfizer this past week, after former CEO Jeff Kindler retired.