Pfizer exceeds Street expectations and divulges a plan for tax law windfall

  • Pfizer beats the Street's fourth-quarter earnings expectations and lays out plans for the new tax law.
  • Pfizer also says its adjusted tax rate will be about 17 percent next year. It anticipates a $15 billion tax bill to repatriate its overseas cash.
  • CEO Ian Reed says Pfizer is on track to make a decision on its consumer health business this year.
Pfizer headquarters
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Pfizer on Tuesday beat the Street's fourth-quarter earnings expectations and laid out its plans for the new tax law.

The pharmaceutical giant reported adjusted earnings per share of 62 cents. The Street had expected earnings per share of 56 cents. Revenue on $13.7 billion was in line with expectations.

Pfizer's innovative health unit grew 5 percent on an operational basis from a year earlier, reaching $8.2 billion in revenue driven by Eliquis, Xeljanz and Prevenar. Its essential health business decreased 8 percent operationally year over year, falling to $5.4 billion.

Shares of Pfizer fell 1.6 percent in premarket trading after initially gaining. Meanwhile, Amazon, Berkshire Hathaway and JPMorgan Chase announced they would partner on U.S. employee health care.

Here's how Pfizer did compared with what Wall Street expected:

  • EPS: 62 cents vs. the Thomson Reuters estimate of 56 cents.
  • Revenue: $13.7 billion vs. $13.7 billion expected by Thomson Reuters' survey of analysts.

In the fourth quarter, the company reported a net profit of $12.3 billion, or $2.02 per share. However, after stripping out special items, the company earned $3.8 billion, or 62 cents per share, in the latest period, outpacing analyst estimates of 56 cents per share.

For the full year, Pfizer forecasts revenue ranging $53.5 billion to $55.5 billion and adjusted earnings per share ranging $2.90 to $3, above the Street's estimates of $53.9 billion and $2.78 per share, respectively. The guidance includes $5 billion in buybacks.

Pfizer said its effective tax rate on adjusted income will be about 17 percent next year, down from 20 percent this year. It anticipates a $15 billion tax bill over eight years to repatriate its overseas cash.

In wake of the new tax law, the company plans to invest approximately $5 billion in capital projects in the U.S., including building its manufacturing presence. It plans to contribute $500 million to its U.S. pension plan and has allocated about $100 million for a special, one-time bonus for all nonexecutive employees in the first quarter of 2018.

Pfizer also contributed $200 million to the Pfizer Foundation.

Bids are due Thursday for its consumer health unit. The company expects the business, which includes brands like Advil and ChapStick, to generate about $20 billion. Johnson & Johnson dropped out of the competition, leaving GlaxoSmithKline and Reckitt Benckiser among those preparing bids.

"We remain on track to make this decision, which could include everything from a full or partial separation to ultimately deciding to retain the business, during 2018," CEO Ian Read said in a statement.