got a healthy lift as Wall Street learned that the company's over-the-counter products unit might be for sale and anticipated Friday's revelation of financial guidance.
"We expect the company to put up a good show, give guidance that is ahead of consensus and not have any significant negative surprises," says Tim Anderson of Prudential Equity Group in a Wednesday research note. Anderson raised his rating to overweight from neutral.
Pfizer's stock rose steadily during the day and closed up $1.43, or 5.7%, to $26.37 on much heavier-than-average trading.
In October, the company
withdrew its financial guidance for 2006 and 2007, citing "current and anticipated business conditions." Analysts polled by Thomson First Call now predict 2006 earnings of $2.03 a share and a 2007 profit of $2.15. On Friday, Pfizer will update this year's forecast and might provide some insight on 2007.
Despite concerns about patent expirations, costs and new products, analysts still show support for Pfizer. Seventeen have buy recommendations and 10 have hold ratings, according to Thomson First Call.
Late Tuesday, Pfizer provided one appetizer to the end-of-the-week extravaganza by announcing it was
examining strategic alternatives for its consumer-products unit. The company said it might keep, spin off or sell its collection of over-the-counter products that produced $3.88 billion in sales, or 7.5% of corporate revenue, last year.
The prospect of putting in play products such as Listerine, Rolaids, Sudafed and Lubriderm sent analysts into overdrive, speculating on which consumer products company or Big Pharma firm, domestic or foreign, might be interested in the unit.
"We expect these assets to attract interest from multiple pharma and consumer strategic buyers," John Boris of Bear Stearns said in a research report. Boris, who has an outperform rating on Pfizer, said the unit could fetch $8 billion to $12 billion. He doesn't own shares, but his firm has had a non-investment-banking relationship with Pfizer.
Anderson suggests the consumer-products group could be sold for $10 billion. A sale would bolster Pfizer's already sizeable war chest -- the company has some $37 billion in foreign subsidiary profits that it repatriated last year.
"With these sorts of financial reserves," Anderson says, Pfizer could
raise its dividend again, buy back more stock or "pursue acquisitions that are hopefully small enough to be viewed as targeted, yet large enough to move the earnings needle." He doesn't own shares, and his firm doesn't have an investment-banking relationship.
Heading into Friday's meeting, Pfizer executives can expect questions not only about 2006 but also about, as analyst Chris Shibutani calls it, "directionality" for 2007 and 2008. Key issues include what happens to Lipitor when two big competing cholesterol drugs, Zocor and Pravachol, lose U.S. patent protection in the next few months. Once that happens, generic copies could flood the market, and managed-care firms might encourage doctors to prescribe the cheaper products.
Shibutani, of J.P. Morgan, also wants to know if executives will provide an update on their cost-saving plans as well as their views on acquisitions and licensing. Shibutani, who has an overweight rating on the stock, doesn't own shares. His firm has had an investment-banking relationship with Pfizer.
"We expect the easing of
legal concerns and the shift in attention to positive developments in the pipeline to drive continued improvement in sentiment," Shibutani said in a research note.