Tuesday, April 28, 2015

Sales Decline Was Little Smaller (Better) Than Expected; Januvia® Doing Well; Keytruda®: Next Big 2015 Variable

Currencies, with the effect of some smart hedging, took only 5 per cent away from the revenue line.

But that will still be a year long factor. And. . . EPS Guidance was raised. Sweet.

. . . .First-Quarter 2015 Worldwide Sales Were $9.4 Billion, a Decrease of 8 Percent, Reflecting Net Unfavorable Impact of Acquisitions and Divestitures and a 5 Percent Negative Impact from Foreign Exchange. . . .

Onward. Busy day ahead.

UPDATED 04.28.2015 @ Noon EDT: So, I had guessed at a 6 per cent headwind for Merck and Pfizer, from currencies. Merck ran some smart hedges, and came in at 5 per cent. Pfizer, on the other hand broke the opposite way, and suffered a 7 per cent headwind, in the quarter (it says). In fact, Mr. Read dropped full year EPS guidance, purportedly solely for the deleterious currencies' effects. That seems very odd to me, because Pfizer should have large property, plant and equipment assets in Europe (naturally denominated in euros), that should in turn be a natural hedge against the strong dollar, on the asset side, and thus mostly wash the effect away, long before it reaches the EPS line, on the income statement, through a non-operating adjustment (largely absorbing the revenue headwind into a correlative euro asset values adjustment, all non-cash).

Said another way, I think Mr. Read is using a little shine-ola, here (again). Or he just flat out underestimated how ferocious the effect is/was always looking to be, throughout 2015 -- when he made guidance predictions in January 2015. But Messrs. Frazier (and Davis). . . nailed it. Now you know. [END UPDATED PORTION.]


Anonymous said...

Maybe the relative underperformance on the forex hedge should rest with PFEs very powerful and tough, but somewhat strategically shallow CFO, though Read surely has overall accountability

Condor said...

Nicely put! I concur.

Read clearly was driving the half-baked inversion shenanigans, and I'd expect he's a micromanager, so I thought it okay to put the F/X "miss" on Read's list...

Namaste -- do stop back!

Anonymous said...

Read wants to make the case to go after AZN again, which I find a a little bit puzzling after the HSP acquisition and the Merck KGa alliance on the PD-L1 inhibitor. Looks like a confused message.