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Pfizer Needs a Healthy Dose of Investor Love

Stocks in this article: PFE ZTS LLY NVS BMY MRK JNJ

NEW YORK (TheStreet) -- Relatively weak revenue growth has been reported by several of the major drug companies, and much of the excitement surrounding all things health care has begun to dissolve. Shares of Pfizer (PFE) still look cheap, but the weak momentum has prompted investors to poke around at management's recent decisions.

While Pfizer didn't end the year as strong as management would have like, it's not yet time to overreact. To keep citing the spin-off of Zoetis (ZTS) as if it were some sort of calamity is crying over spilled milk, at best. It's been almost a year. There is no basis to support the notion Pfizer's revenue numbers would have been meaningfully better had it kept Zoetis as part of its core operation.

Prior to the spinoff, investors were incessantly complaining about Pfizer's size. The company was seen as "too big" to innovate or return value back to shareholders. Last year, however, Pfizer's stock soared 26%, which beat the S&P 500 -- and this doesn't even include the company's 3.3% dividend yield and the fact that it boosted its share buyback program by $10 billion.

You can't have it both ways. Pfizer's growth will come. It's just going to take more time.

The thing to remember with this story is that although revenue was down 3% year over year, Pfizer is still producing on the bottom line. From an operational perspective, the company is posting the sort of margins Eli Lilly (LLY) and Novartis (NVS) would kill for. When you consider Pfizer's operating margin beats Bristol-Myers Squibb (BMY), a company the Street happens to love, there's clearly been a disconnect with Pfizer's absolute results.

Now, I'm not suggesting the results were exceptional. But this isn't a case where Pfizer's management tried to sell them as if they were huge accomplishments. The other thing is, even though the revenue number seemed unimpressive it was still good enough to beat the consensus estimate by roughly 1%. The Street, somehow, missed that fact. Instead, analysts focused on the company's operating income, which was seen as "weak" -- even though the number met expectations.

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