Citi Gives Its Initial Thoughts On Pfizer Following Recent Earnings Release

Pfizer PFE reported 1Q11 EPS of $0.60, in line with Citi's $0.60 and above the Street's $0.59 on sales of $16.5B vs. Citi's $16.6B & the Street's $16.7B. High than projected gross margins & a lower tax rate largely offset the top-line miss and slightly lower than projected share repurchase. US Pharma sales outperformed, but were mostly offset by lower ex-US Pharma. Global sales were $16.5B, with a +1% benefit form FX. Citi estimates that sales growth would be roughly -2% YoY without the inclusion of two months of KG sales. Gross margin was 81.3% vs. its 80.7% estimate. Reported net income as a percentage of sales was 29.1% vs. Citi's 28.5% estimate. Share count of 8.04B came in above Citi's 7.92B, as PFE repurchased $1.4B shares in 1Q11 vs. Citi's $2.5B assumption. Pfizer's US biopharma outperformed, mostly offset by ex-US. Based on Citi's model, it largely sees the outperformance coming from lower margin “other products” including generics and emerging markets. Lipitor underperformed in ex-US, as did Prevnar & Geodon. Effexor XR & Vfend saw less attrition from generics & outperformed Citi's expectations. Citi has a $23 PT and Hold rating on PFE Pfizer is trading lower at $20.65