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Pfizer Sends Investors into Excitement

Pfizer’s ($PFE) Q3 earnings results made up one of the most positive headlines on Tuesday. Even before the market opened, the Big Pharma company announced its results and that immediately reflected in the early trading hours with its stock soaring more than 3%. That shows how investors just loved everything the Pfizer Q3 earnings announcement contained.

But apart from the fact that Pfizer beat Wall Street estimates, Motley Fool analyst Keith Speights reckons there was something else in the report that got investors excited. There clearly was something “quite different” in this particular earnings announcement from Pfizer that distinguished it from the company’s previous earnings announcements.

Not All Figures Were Up

The thing is, the report didn’t just contain Pfizer’s current situation - which was great considering it beat market expectations - but also glimpses into the future.

While the headline revolves around the earnings exceeding expectations, there are other aspects to consider. The company’s revenue had a 5% dip year over year and was down to $12.7 billion. What soared was the company’s net income on the basis of GAAP (generally accepted accounting principles). That had an 87% jump to $7.7 billion. But there was a drop in Pfizer’s adjusted net income. It had an 8% dip to $4.2 million. And despite the stock buybacks, Pfizer’s adjusted EPS (earnings per share) actually dropped to $0.75, a year over year dip of 2%. So how come there was so much positivity?

Revenue Decline Due to Combination of Factors

That’s because there is a back story to this. The revenue decline Pfizer experienced was primarily the result of a combination of factors. The company’s consumer healthcare business joined with GlaxoSmithKline’s healthcare unit. Since the deal only concluded on July 31, there was just a month of consumer healthcare revenue from the collaboration that could be added to the company’s Q3 total. There were also currency fluctuations to account for, which caused the revenue to sink 2% lower than otherwise. But despite these factors, Pfizer was able to have a somewhat flat revenue year over year. And that quite easily exceeded the $12.26 billion Q3 estimate from Wall Street.

The joint venture actually brought about the massive increase in GAAP earnings. Despite the fact the adjusted EPS in the prior-year was slightly greater, the third quarter EPS was still greater than $0.62 adjusted estimate by analysts.

Pfizer RemainCo Does Great

But there is another division of Pfizer that it calls “Pfizer RemainCo”, which basically refers to the parts of the company’s business that will continue after its Upjohn unit merges with Mylan ($MYL). The RemainCo section saw 7% year over year rise in revenue in Q3, reaching $10.1 billion, fueled by the 40% increased sales of the Xeljanz immunology drug, the 27% improved sales of Ibrance drug for breast cancer, and the 20% increased sales of the Eliquis anticoagulant. Some of the new drugs also displayed improved performance, such as the Inlyta kidney cancer drug that touched $139 million, nearly double from the prior-year, while Vyndaquel drug for a rare disease reported sales worth $156 million.  

Upjohnis going to be spun off. This division really didn’t do well in the third quarter, with year over year sales plunging 28% to $2.2 billion. However, its revenue from China increased.   

Pfizer Raises Guidance

But Pfizer has raised the full-year 2019 top-line as well as bottom-line guidance. Full-revenue is expected to be from $51.2 billion to $52.2 billion.That’s an improvement over its earlier outlook which was in the region of $50.5 billion to $52.5 billion. It also expects full-year adjusted EPS to be from $2.94 to $3.00, which is an improvement over the earlier guidance from $2.76 to $2.86. 

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