What Does Pfizer’s 2016 Guidance Look Like?

Why Analysts Were Mostly Upbeat about Pfizer's 4Q15 Earnings

(Continued from Prior Part)

Pfizer’s profitability

Pfizer (PFE) reported a rise of ~7% in revenues in 4Q15. Its net profit margin improved to 18.5% in 4Q15 compared to ~9.4% in 4Q14, while its gross margin fell to 78.8% in 4Q15.

Its cost of sales fell for its Global Innovative Pharmaceuticals (or GIP) and Global Established Pharmaceuticals (or GEP) segments. This was partially offset by an increase in the cost of sales for its Global Vaccines, Oncology, and Consumer Healthcare (or VOC) segment, resulting in an improved gross margin.

Pfizer’s operating profit margin fell by 3.3% to 13.1% in 4Q15 compared to 16.4% in 4Q14. Its selling, informational, and administrative expenses rose due to the launch of new products as well as its increased expenditure on promotional activities for existing products. Its research and development expenses as a percentage of sales increased due to higher spending on its late-stage pipeline across all segments.

Financial guidance 2016

Pfizer also announced its financial guidance for 2016. Its revenues are estimated to be between $49.0 billion and $51.0 billion, nearly 1% higher than its 2015 revenues of $48.9 billion.

The estimated range for the company’s cost of sales as a percentage of revenues is between 21.0% and 22.0%. This is due to increased costs of sales for Hospira products. Also, its selling, informational, and administrative expenses are estimated to be between $13.2 billion and $14.2 billion, while its research and development expenses are estimated to be between $7.3 billion and $7.8 billion, following developments in the various products discussed in previous articles.

Pfizer has estimated its adjusted diluted EPS (earnings per share) to be in the range of $2.20–$2.30 for 2016, following the impact of both Pfizer’s product portfolio and its Hospira products.

Investors can consider ETFs such as the Vanguard Health Care ETF (VHT), which holds ~6.3% of its total assets in Pfizer, ~3.9% in Allergan (AGN), ~8.7% in Johnson & Johnson (JNJ), ~3.5% in Bristol-Myers Squibb (BMY), and ~4.6% in Merck and Co. (MRK). Investors can also consider ETFs such as the iShares Russell 1000 ETF (IWB), which holds 0.9% of its total investments in Pfizer, in order to divest their risk.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Pfizer Reported 7% Top Line Growth in 4Q15

• Part 2 - Pfizer’s Loss of Product Exclusivity Affected Its 4Q15 Revenues

• Part 3 - Key Products Drove Pfizer’s Growth in 4Q15