Pfizer's Got Plenty of Upside

Glenn Curtis

If I had to pick one drug stock to own for the next 10 years, it'd be Pfizer(PFE - Cramer's Take - Stockpickr). I mean, let's face it. This company has it all -- a tremendous pharmaceutical business and a bevy of blockbuster consumer products from Benadryl to Listerine to Zantac. The combination has the potential to provide investors with double-digit earnings growth for at least the next three to five years.

What makes me so optimistic?

Take a look at how some of its key pharmaceuticals are performing. In the third quarter, Lipitor (for cholesterol) sales jumped 37%, while Neurontin (for epilepsy) and Viagra (you know what that's for) reported year-over-year increases of 32% and 13%, respectively. Put simply, the company is, unlike many of its big name competitors, firing on all cylinders.

And although some may point out that its consumer business continues to struggle, Pfizer's ability to milk efficiencies out of its merger with Warner Lambert will more than pick up the slack. In fact, sources tell me that management's efforts to improve the company's product mix and reduce headcount at the acquired company will lead to consistent margin improvement through next year.

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But even more interesting to me is management's comments in conjunction with its past two earnings releases. On conference calls with the investment community, Pfizer has stated repeatedly that it's comfortable with full-year 2001 earnings estimates of $1.27 to $1.30 per share, and 2002 estimates of $1.56 or better. Put simply, management's enthusiasm and proven ability to perform suggests that these estimates are pretty darn conservative, and that future upside earnings surprises are likely in the cards.

So what's Pfizer worth?

Based upon the company's stated goal of growing earnings by 20% or more in the coming year, and bringing hot new products such as Exubra (an inhaled insulin) and Neurontin (for neuropathic pain) to market within the next two years -- I think we are looking at a $50 stock at a minimum. Who won today's Face-Off? Glenn Curtis Lissa Morgenthaler

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