Pfizer (PFE) Q2 2016 earnings summary

Executive summary

• Q2 revenue was $13.147B, up 11% reported and 13% operationally; excluding legacy Hospira, revenue was $12.009B, up 4% operationally.

• Adjusted diluted EPS rose 14% to $0.64, while reported diluted EPS fell 21% to $0.33; 2016 revenue and adjusted EPS guidance was reaffirmed.

Financial highlights

• Q2 adjusted net income increased 11% to $3.901B; reported net income fell 23% to $2.019B, mainly reflecting impairment and legal charges, FX, LOEs and the Allergan termination fee.

• Q2 revenue included $1.1B from legacy Hospira; unfavorable FX reduced revenue by $302M, or 3%, and adjusted diluted EPS by ~$0.06 year over year.

• Q2 reported diluted EPS was $0.33 versus $0.42; H1 reported diluted EPS was $0.82 versus $0.80, and adjusted diluted EPS was $1.30.

• H1 operating cash flow was $5.230B, up 10% year over year.

Outlook and guidance

• Reaffirmed FY 2016 revenue guidance of $51.0B–$53.0B and adjusted diluted EPS guidance of $2.38–$2.48.

• Guidance included $2.3B of expected revenue impact from generic competition and $1.4B from FX, including $0.8B from Venezuela; FX was expected to reduce adjusted EPS by ~$0.10.

• Adjusted cost of sales guidance was 21.0%–22.0%; adjusted SI&A $13.7B–$14.7B; adjusted R&D $7.4B–$7.8B; adjusted tax rate ~24%.

• Hospira integration was expected to yield $1B in annual cost savings by 2018, with ~$1B in one-time costs over up to three years.