THE MARKET MIDDAY
DJIA 10454.86 -7.86 (-0.08%) S&P 500 1319.94 -2.91 (-0.22%) Nasdaq 2505.61 -16.16 (-0.64%) Russell 2000 420.70 +2.93 (+0.70%) 30-Year Bond 95 21/32 -11/32 5.55 Yield
Knee-Jerk of the Wise
Yesterday, Pfizer (NYSE: PFE) was clocked for a 10% loss after reporting first quarter diluted earnings per share of $0.62, in-line with estimates and up 27% year-over-year (excluding the impact of one-time charges and the divested Medical Technology Group). Following a strong fiscal 1998 performance, which marked the company's 49th consecutive year of increased revenues, the drug giant's momentum continued this quarter with total revenues up 29% year-over-year.
So, why did Wall Street send the shares tumbling? Part of the "disappointment" was due to the company's decision to forego current earnings in favor of higher investment in research and development (+36%) and sales staff (+31%). In an Associated Press release, CIBC Oppenheimer analyst Steven Gerber was quoted as saying, "It's a very smart strategy for the long haul, but does not help the short term."
Such is the perverse myopia of the Wise. Many of Wall Street's traders are so obsessed with earnings per share that they miss the bigger picture. For Pfizer, the bigger picture is nothing less than enormous. In fiscal 1998, the company began to hit its stride as it promoted twelve human pharmaceuticals, eight of which produced revenues greater than $500 million, and ten of which ranked #1 or #2 in their categories.
In the quarter just ended, Pfizer's performance was propelled by strong sales of Norvasc, the world's #1 anti-hypertensive for cardiovascular-related diseases; Zithromax, the most-prescribed brand-name oral antibiotic for a variety of infectious diseases; and Zoloft, a leading anti-depressant. Pfizer's partnerships with other pharmaceutical companies also paid off during the quarter. The company's alliance with Warner-Lambert (NYSE: WLA) in the marketing of Lipitor, a cholesterol-lowering agent, has been successful in capturing a 45% share of U.S. new prescriptions for this category. Sales of G.D. Searle & Co.'s Celebrex, an arthritis relief drug, have been very strong, receiving more than 330,000 weekly U.S. prescriptions since the product's launch in February.
The golden age of science is opening up unlimited possibilities in the pharmaceutical industry, and Pfizer is leading the pack with the most projects in discovery and development in company history. New medicines in the advanced stage of development create the potential for more than 20 products in Pfizer's drug portfolio by early in the next decade. Treatments for migraine headaches, irregular heart rhythm, schizophrenia, diabetes (inhalable insulin), and breast cancer are just a few of the projects in the works. Foolish investors may want to further investigate Pfizer's potentially lucrative wonder drugs of the 21st century.
Pfizer's Earnings Press Release
A Funny Take on Pfizer's Earnings, by "ToddK1" on the message boards.
Appliance maker Whirlpool Corp. (NYSE: WHR) spun ahead $4 7/16 to $59 1/16 after CEO David Whitwam said in a press release that "based on the fundamental strength of our operations in North America and Europe, and our continued improvement in Asia, we expect to overcome the current challenges in Brazil and deliver a year of solid operating performance improvement.'' Q1 EPS was $1.15 before currency devaluation was figured in, beating Wall Street's $0.91 consensus estimate.
Online services provider America Online (NYSE: AOL) took on $3 3/8 to $147 1/4 on news in The Wall Street Journal of its plans to launch a line of Internet-friendly gadgets, including screen phones, that don't require personal computers. The devices would give AOL users quick access to e-mail and Web pages.
New York City high-speed Internet access provider SpeedUs.com (Nasdaq: SPDE) accelerated $1 3/4 to $6 3/4 this morning following news of a licensing agreement with America Online's Netscape Communications giving SpeedUs.com the right to integrate its access service with Netscape's Communicator 4.5 browser.
Television-based Internet service company WorldGate Communications (Nasdaq: WGAT) won $12 7/16 to $46 7/16 in its second day of trading. The company got $13 yesterday after selling 5 million shares at $21 each.
Online retailer and wannabe auctioneer Amazon.com (Nasdaq: AMZN) swung up $20 to $187 1/4 after a Donaldson, Lufkin & Jenrette analyst boosted his rating on the shares to "top pick" from "buy," setting a $280 12-month share price target. Analyst Jamie Kiggen believes auction revenue at the company could be $20 million this year and $65 million in 2000.
Internet business services company Rare Medium Group (Nasdaq: RRRR) heated up $1 7/32 to $11 7/32 after investment firm Apollo Management said it would invest $75 million worth of equity into Rare Medium to make the company a "one-stop provider of venture capital, Internet solutions, and professional services." Apollo will become a 25% owner of Rare Medium with options that could boost its stake to 40%.
Flat rolled steel processor Steel Technologies (Nasdaq: STTX) was burnished for a $1 5/16 move to $9 5/16 after Bear, Stearns & Co. boosted its rating on the stock to "buy" from "neutral."
Erectile dysfunction treatment developer Vivus Inc. (Nasdaq: VVUS) rose $11/16 to $5 3/16 after reporting late yesterday afternoon that it expects to report Q1 EPS of $0.12 when it announces results after the market's close on April 21. The one analyst polled by First Call had a $0.04 per share profit estimate.
Online retailer CyberShop International (Nasdaq: CYSP) bagged gains of $1 1/16 to $13 3/16 after announcing a marketing agreement with Inktomi Corp. (Nasdaq: INKT) that will incorporate its products into Inktomi's shopping engine. The engine is slated for inclusion on 20 "leading portal and destination sites across the Web," including Infoseek (Nasdaq: SEEK), CNET (Nasdaq: CNET), GeoCities (Nasdaq: GCTY), CNNfn, and several lower profile sites.
Industrial wire and nail manufacturer Insteel Industries (NYSE: III) got $7/8 to $7 3/8 after it said increased federal highway spending is expected to boost demand for its concrete reinforcing products beginning this year. The company reported fiscal Q2 EPS of $0.30, a vast improvement over last year's $0.04 loss. The one analyst surveyed by First Call was looking for EPS of $0.20.
Funeral home and cemetery operator Service Corp. International (NYSE: SRV) moved up $1 5/16 to $17 13/16 after J.P. Morgan raised its rating on the stock to "buy" from "outperform." Click here for a recent Boring Portfolio report on the out-of-favor deathcare industry.
Continental Airlines (NYSE: CAI.B) up $3/8 to $44 3/4; Q1 EPS $1.03 (before charges) vs. $1.06 last year; estimate: $0.93
Eastman Kodak (NYSE: EK) up $5 1/4 to $71 13/16; Q1 EPS $0.80 (before charges) vs. $0.73 last year; estimate: $0.76
Idexx Laboratories (Nasdaq: IDXX) up $1/4 to $22 7/8; Q1 EPS $0.18 vs. $0.10 last year; estimate: $0.18
Inktomi (Nasdaq: INKT) up $12 3/4 to $131 15/16; fiscal Q2 EPS loss of $0.09 vs. loss of $0.13 last year; estimate: loss of $0.12
Jack Henry & Associates (Nasdaq: JKHY) up $15/16 to $34 1/4; fiscal Q3 EPS $0.37 vs. $0.27 last year; estimate: $0.38
Kronos Incorporated (Nasdaq: KRON) up $2 1/4 to $27 3/4; fiscal Q2 EPS $0.35 vs. $0.23; estimate: $0.28
Rental Service Corp. (NYSE: RSV) up $5/16 to $23 1/16; Q1 EPS $0.32 vs. $0.27 last year; estimate: $0.29
Security Dynamics Technologies (Nasdaq: SDTI) up $1 13/16 to $18 5/16; Q1 EPS $0.12 vs. $0.14 last year; estimate: $0.12
Splash Technology Holdings (Nasdaq: SPLH) up $1 15/16 to $8 7/16; Q1 EPS $0.13 vs. $0.15 last year; estimate: $0.07
Unicom Corp. (NYSE: UCM) up $1/2 to $37 1/8; Q1 EPS: $0.50 (before one-time items) vs. $0.29 last year; estimate: $0.36
Computer workstations and Java programming language developer Sun Microsystems (Nasdaq: SUNW) was burned $4 11/32 to $56 3/32 after reporting non split-adjusted fiscal Q3 EPS of $0.71 (excluding acquisition-related charges), up from $0.59 last year and a penny above the First Call mean estimate. However, Merrill Lynch lowered its near-term rating on the company this morning to "accumulate" from "buy" based solely on valuation concerns.
Web portal company Excite (Nasdaq: XCIT) slipped $8 3/16 to $138 3/4 after posting Q1 earnings of $0.04 per share (excluding acquisition-related costs), up from loss of $0.16 per share last year but a penny shy of the First Call mean estimate. Merger mate @Home Corp. (Nasdaq: ATHM) fell $4 1/2 to $148.
Internet retailer Onsale Inc. (Nasdaq: ONSL) was marked down $5 3/16 to $29 7/8 after posting a Q1 loss of $0.28 per share compared to a loss of $0.22 per share a year ago, which was a penny worse than the loss expected by analysts surveyed by First Call. Raymond James, Needham & Co., and Everen Securities all downgraded the firm this morning.
Human antibody-based products and services company Serologicals Corp. (Nasdaq: SERO) slumped $4 11/16 to $5 3/8 after saying two international customers are cutting back their expected orders this year for a Serologicals specialty antibody used to make anti-D immune globulin, which is used prevent a blood-related disease in newborns and treat an HIV-related platelet ailment. As a result, fiscal 1999 earnings could come in as much as $4 million, or $0.15 per share, below analysts' current expectations.
Bank holding company Union Planters Corp. (NYSE: UPC) faceplanted $3 3/16 lower to $42 1/8 after releasing Q1 EPS of $0.67, down from last year's $0.74 and below the First Call mean estimate of $0.76. The company chalked up the shortfall to integration issues related to recent acquisitions and operational changes during the period. Both Merrill Lynch and Wachovia Securities lowered their opinions on the stock.
Arlington, Virginia-based investment bank Friedman, Billings, Ramsey Group (NYSE: FBG) gave back $1 1/2 to $12 15/16 after rising 47% yesterday on news that it has launched an Internet site at www.fbr.com that will allow online investors to participate in the company's initial public offerings and venture capital investments.
Banking management software developer Phoenix International (Nasdaq: PHXX) slid $2 1/2 to $5 after saying a business slowdown caused in part by its banking customers' responses to the Year 2000 issue will result in lower-than-expected Q1 revenues and a loss for the period between $0.13 and $0.15 per share. The company said analysts had been expecting earnings of $0.10 per share.
Polyurethane and polymer foam products maker Foamex International (Nasdaq: FMXI) broke down for a $3/4 loss to $6 1/4 after saying that based on a soon-to-be-completed audit, certain unspecified "actions" taken in the fiscal fourth quarter may lead to a restatement of the company's results during the first three quarters of fiscal 1998. The company is currently estimating fiscal 1998 earnings before interest, taxes, depreciation, and amortization (EBITDA) of $105 million, down from an earlier preliminary forecast of $125 million.
News and financial information provider Reuters Group PLC (Nasdaq: RTRSY) was boxed for a $6 1/4 loss to $89 3/4 after Morgan Stanley Dean Witter cut its rating on the stock to "neutral" from "outperform."
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