Pfizer (PFE) Q4 2016 earnings summary

Executive summary

• FY 2016 revenue was $52.824B, up 8% reported and 11% operationally; growth was 5% operationally excluding Hospira and Medivation.

• Growth reflected new and mature brands, acquisitions, sterile injectables and biosimilars; product losses of exclusivity remained a significant offset.

• 2017 guidance targets $52B–$54B revenue and $2.50–$2.60 adjusted diluted EPS, with operational growth offset by competition, FX and the infusion-systems sale.

Financial highlights

• Q4 revenue was $13.627B, down 3% reported and 1% operationally; fewer selling days reduced revenue by ~$750M, and FX reduced it by $228M.

• Q4 reported net income was $775M versus a $172M loss; adjusted income was $2.894B, down 12%, and adjusted diluted EPS was $0.47, down 11%.

• FY reported net income was $7.215B, up 4%; adjusted income was $14.761B, up 7%, and adjusted diluted EPS was $2.40, up 9%.

• FY revenue growth of $4.0B included $5.5B operational growth, partly offset by $1.5B of unfavorable FX; Venezuela accounted for $778M of the FX impact.

• FY 2016 results met or exceeded guidance for revenue, adjusted diluted EPS and adjusted income tax rate.

Outlook and guidance

• 2017 guidance: revenue $52.0B–$54.0B; adjusted diluted EPS $2.50–$2.60; adjusted cost of sales 20%–21%; SI&A $13.7B–$14.7B; R&D $7.5B–$8.0B.

• Guidance midpoints imply 6% adjusted EPS growth; excluding the HIS disposition and FX, implied operational growth is 4% for revenue and 10% for adjusted EPS.

• Expected 2017 revenue headwinds total $4.5B: $2.4B from generic and biosimilar competition, $1.2B from the HIS disposition and $0.9B from FX.

• Guidance assumes a ~$0.05 FX impact on adjusted diluted EPS, a 23% adjusted tax rate and ~6.1B diluted weighted-average shares.

• Guidance includes $5B of share repurchases, expected to more than offset employee-compensation dilution.