

Our investment thesis is that PFE stock can appreciate as the company realizes WYE merger synergies, management makes better capital allocation decisions, and pipeline newsflow accelerates in 2010-2011.
Pfizer's 2012E trough is the soonest, so it should be first among U.S. Major Pharma to return to growth. Our $22 target is 10.5x trough 2012E of $2.10. Note that we model troughs for BMY and LLY three years later (in 2015), and they trade at higher multiples on the troughs (BMY at 13.6x 2015E of $1.79 and LLY at 11.7x 2015E of $3.00). We model a 2013 trough for MRK, which trades at 11.8x our 2013E of $3.23. Please refer to p. 3.
More conservative 2012 guidance on Feb. 3rd should remove overhang. We expect mgmt to lower its 2012 $70B revenue target when PFE reports on Feb. 3rd because the target is unachievable, in our view. We model $59B in 2012 sales (cons. is at $60.5B), but we would guess that mgmt may project a higher amount including future acquisitions. Mgmt could also slightly lower its 2012 EPS target of $2.42 if additional cost cutting and future acquisitions do not fully offset revenue reductions. We project 2012E of $2.10, and consensus is at $2.20. Although some investors assume PFE will maintain its 2012E of $2.42, we would view it as upside surprise.
We forecast Pfizer to return to growth post-2012 and earn a higher stock multiple. We project 2012-2015 EPS growth of 3-5%. We note that mgmt anticipates "modest" top line growth and stronger bottom line performance on a "consistent and reliable basis."
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