Full Earnings Season Expectations for Big Pharma (LLY, JNJ, MRK, PFE, WYE)
There is a fairly large expectation that drug companies will be one of the safer earnings plays in 2009. That will either be confirmed or will get thrown out the window as the drug giants report earnings over the next couple of weeks. We have giants such as Eli Lilly & Co. (NYSE: LLY), Johnson & Johnson (NYSE: JNJ), Merck & Co. (NYSE: MRK), Pfizer Inc. (NYSE: PFE) and Wyeth (NYSE: WYE) all coming out with earnings. We have compiled consensus estimates from Thomson Reuters (First Call) and given some of the pending issues and other developments inside each of these Big Pharma drug companies.
What will be interesting is the tune to which earnings have been kept up by cost cuts and expense management rather than by top-line growth as we would have hoped to see in years past. We also expect that the somewhat stronger US-dollar will reduce the reported earnings from overseas units of major US drug companies as they convert local currencies into dollars. Lastly, we have the nearly never-ending conversations about which Big Pharma company will buy a smaller drug company or even a large biotech operator.
DJIA component Johnson & Johnson (NYSE: JNJ) reports next week on January 20 as of today and analysts expect $0.92 EPS on revenues of $15.97 billion. This would compare to a report from January 2008 of $0.88 EPS on revenue of $15.96 billion. We have little new to go on here with the recent failure of its psoriasis drug at the FDA with the agency wanting additional data on it. It is in the middle of several acquisitions, with Mentor being the most recent. J&J faces some of the same generic threats that others face, and its diversification in “products” is helping to keep this one a bit more insulated than others.
Wyeth (NYSE: WYE) is on deck with its earnings report expected on January 28 or January 29. Analysts are expecting $0.79 EPS on revenues of $5.83 billion, which compares to $0.78 EPS and $5.76 billion in revenues from the year before. Wyeth is going to be difficult to evaluate with the pending acquisition talks of Dutch vaccine maker Crucell NV (NASDAQ: CRXL). The company is also expecting the bulk of its growth ahead to come from non-traditional drug sales. So look for more “products” and for other possible acquisition hints if it holds that line.
DJIA component Pfizer Inc. (NYSE: PFE) is also on deck with earnings still two weeks away on January 28. Analysts are looking for $0.60 EPS on $12.6 billion in revenues. That compares to last January’s report of $0.52 EPS and almoist $13 billion in revenues. The big concern here is just how much Pfizer plans to cut costs as it has just announced. It also has holes in its model with upcoming patent expiration dates signaling that the company may be the most likely to make acquisitions in biotech.
Eli Lilly & Co. (NYSE: LLY) is also on January 29 and analysts are expecting $1.05 EPS from $5.4 billion in revenues. Its report a year ago was $0.90 EPS on revenues of about $5.2 billion. An issue here is the huge acquisition of ImClone and a massive charge expected to come along with it. Wall Street may be looking for the expanded use of Erbitux rather than the absolute uses currently approved. Carl Icahn himself said many announcements were expected there. We’ll also be listening for any good or bad data on Prasugrel, the experimental anti-clotting drug.
DJIA component Merck & Co. (NYSE: MRK) is expected to report the first week of February. Consensus estimates are $0.74 EPS on $6 billion in revenues. This is one of the few drops as last year’s report was $0.80 EPS on $6.2 billion in revenues. The drop here is tied to recent warnings over lab closures and the job cuts that it plans to make over the next few years. The big wild card is its “end of 2009 review” for an expanded use of Gardisil for older women and potentially for use in men to curb the spread of HPV.
Be advised that these estimates can and likely will change before the actual earnings reports. Some of these are a week or two out and as we get reports you can bet estimates on peers will change.
Jon C. Ogg
January 13, 2009
