Chrt: this is worth its own thread; what is a stock worth when it is shrinking earnings over the long term?
Even if PFE hits its "target" for three YEARS out to 2012, which I don't believe given that it just missed consensus earnings forecast for three MONTHS out ending last Dec., PFE earnings will have declined since 2002 to 2010, and by 2012 will likewise have declined in real dollars adjusted for inflation:
<OVERVIEW OF CONSOLIDATED OPERATING RESULTS
. . . Net income grew 17% to $9,126 million and diluted earnings per common share (EPS) grew 20% to $1.46 in 2002.>
With PFE offering fwd 2010 eps guidance at a midpoint of 1.02, even if they achieve that, it will represent a decline of about 30 percent in earnings since 2002's 1.46. That is a straight line loss of earnings of -3.7% per year since 2002.
Assume PFE makes its "target" of 1.65 in 2012. That would represent eps "growth" before inflation of about one percent per year, or a loss in real dollar terms after inflation.
Q: Why would you pay 18x forward 2010 eps for something that has a real growth rate of less than zero?
I didn't read your drivel, but in looking at the EPS you posted over a 12 year period, it would seem to offer evidence that your theory is worthless. Over time, the patent expiration schedule is meaningless, as they all expire. Only new drug creation matters.
why ask a question like that,when there's no answer to it,LOL.
well,let me be kind:he gambles,ping-pong,used to bowl and bend over for 20 cents.he's an artist of the confused society.in my eyes he's another hero who never made it like superman,spiderman,etc,but,always a but,he could qualify for DICK's place,tracey that is,LOL.
PE is based on EXPECTED FUTURE GROWTH - not what it has been. In the 2003-2012 period, PFE's earnings growth is being held down by TWO periods of big, clustered patent expirations:
1) The years 2005-2008 that saw the expiration of Neurontin, Zithromax, Zoloft, Norvasc and Zyrtec. That's a lot of major drugs in just a four-year period. And then on top of that, Pfizer saw its Cox-2 franchise severely cut as well.
2) The 2011-2012 patent-expiration cliff period that will see the loss of exclusivity for Lipitor, Xalatan, Viagra and Detrol.
And yet with all that, GAAP earnings in 2012 are expected to be $1.65 midpoint. That will be the highest of any year since 2004 with the sole exception of 2006 which was a complete anomaly due to the sale of Consumer Products.
The fact is that 2012 is supposed to be a TROUGH year for "adjusted" earnings and yet GAAP earnings will be at an eight-year high excepting that one anomalous year of 2006.
If Pfizer can do that well even with the major expirations, can you imagine how well it figures to do when there will be only three big drugs losing exclusivity between October 2012 and early 2018 (Enbrel, Celebrex and Zyvox)?
At the end of 2012, nobody will give a damn about what the company has done earnings-wise the previous decade; only what is expected from then on. And unless there are real travesties, it's just impossible for a big pharma NOT to be able to grow earnings apace when there are so few patent expirations to hold earnings back.
And that's especially true when a company buts back about 3% of its shares each year. And obviously with Free Cash Flow of $20B a year and with most of the debt already paid off by year-end 2012, what would stop the company from making regular stock buybacks each year as they did between 2004 and 2007? Because even with dividends as high as the old rate of $1.28 annually,m that would still barely be $10B. There would still be $10B per year of unused Free Cash Flow. And with so little in the way of patent expirations after 2012, certainly no more big acquisitions would be needed. Maybe the company would start buying back even more than 3% a year of its shares.
In short, Pfizer will be an earnings growth powerhouse post-Lipitor and it will have an appropriate PE.
"In the 2003-2012 period, PFE's earnings growth is being held down by TWO periods of big, clustered patent expirations"
I really think you should just stop posting after that. The effective patent life of the average new pharmaceutical in the 1990s averaged just 12 years. If you are seriously going to claim that PFE's earnings over a 10 YEAR PERIOD are held down by high patent expirations, you really have no business investing in PFE or posting on this f-ing board. Just stop.