The Major League Baseball League Championship Series and Earnings Season are in full swing this week. The former began last night, with Arizona's Big Unit shelling out a dominant performance against Atlanta. Meanwhile, the latter started more than a week ago and several Rule Maker Portfolio holdings have reported results in recent days. Today, we'll take a break from the Portfolio review and look at the quarterly announcements of Pfizer, Johnson & Johnson, Intel, and Yahoo!
Pfizer (NYSE: PFE), the Portfolio's best performing stock with a 50% return, reported better-than-expected results this morning, citing strong sales of blockbuster drugs and cost savings from the Warner-Lambert acquisition. The company reported earnings of $2.07 billion, or $0.33 per share, versus $1.36 billion, or $0.21 per share, in the year-ago period. Revenues jumped 10% to $7.90 billion. Excluding the Warner- Lambert acquisition, promotional agreements and sales of assets, profits were $2.19 billion, or $0.34 per share, a penny ahead of Wall Street's estimate.Drug sales increased 13% over the year-ago period to $6.23 billion, however, revenues would have risen 16% excluding the impact of foreign exchange. Lipitor sales increased 37% to $1.66 billion, as the cholesterol drug gained market share from the market withdrawal earlier this summer of Bayer AG's competing offering Baycol. Sales at its animal-health division increased 22% to $254 million, while consumer product revenues, which include medicine cabinet favorites Listerine and Sudafed, fell a disappointing 1% to $1.31 billion.
The quarter was what we've come to expect from the world's largest drug maker. The company said it expects further strong results for the rest of the year and beyond, and maintained Wall Street's full-year consensus earnings expectation from continuing operations of $1.30 per share, representing 21% growth over the previous year. Since we reviewed Pfizer last month in an article entitled, "Catching Up With Pfizer," we haven't changed our opinion. We look forward to remaining shareholders, but the current stock price remains fully valued.
In addition to Pfizer, Johnson & Johnson's (NYSE: JNJ) strong third-quarter earnings this week was further evidence drug stocks can post above-average results regardless of the economy. J&J, which has averaged 10.5% annual net income growth for the last 100 years, grew earnings 16% over the year-ago period and beat Wall Street's estimate by a penny, on strong sales of drugs and medical devices. The company earned $1.53 billion, or $0.49 per share, compared to $1.32 billion, or $0.43 per share, in the year-ago period. Revenues increased 11% to $8.24 billion.
Drug sales increased 16% to $3.68 billion, while medical-device sales grew 9% to $2.78 billion. Its Cordis unit, which makes cardiovascular devices like stents -- tubes that prop open arteries to maintain blood flow to the heart and prevent blockage -- grew revenues 20% to $326 million. J&J's stent business has received increased attention since it released positive data on a new line of stents called Cypher last month. The company also told analysts to raise their full-year earnings estimate upward two cents to $1.90 per share. Overall, there was no surprise here.
Intel (Nasdaq: INTC) announced much more disappointing results yesterday than the aforementioned pharmaceutical stocks, however. The world's largest chipmaker reported third-quarter earnings that plummeted 96% over the year-ago period, inline with the company's earlier guidance. Intel earned $106 million, or $0.02 per share, compared to $2.51 billion, or $0.36 per, in the year-ago period. Sales fell 25% to $6.55 billion. Excluding acquisition-related items, the company would have earned $0.10 per share, inline with Wall Street's consensus estimate.
The bigger news, although not surprising, was the company's lackluster guidance. Intel expects weak fourth-quarter sales of $6.2 billion to $6.8 billion, roughly the same indication the company gave in the prior period and well below its top-line results of $8.7 billion in the comparable quarter last year. Intel had maintained in prior quarters that sales would increase in the second-half of this year because of the holiday season and the release of Microsoft's (Nasdaq: MSFT) new personal computer operation system, Windows XP.
In the meantime, Intel has cut prices to increase demand and steal market share from rival Advanced Micro Devices (NYSE: AMD). Intel's processor market share increased from 76.7% in the second quarter to 77.5% in the third quarter, according to Mercury Research, while AMD's share fell from 22.2% to 21.5%. The price war, while growing Intel's market share, has also hurt the company's profitability, as evidenced by its 96% earnings drop and margin erosion. Despite the current conditions, our position on Intel hasn't changed, as we recently indicated.
Lastly, Yahoo! (Nasdaq: YHOO) continues to combat difficult economic and online advertising spending conditions. The company posted a third-quarter loss of $24.1 million, or $0.04 per share, compared to earnings of $47.7 million or $0.08 per share, in the year-ago period. Sales fell from $295.5 million in the year-ago period to $166.1 million. Yahoo! reported pro forma earnings of $8.4 million, or $0.01 per share, inline with Wall Street's estimate, but well below the $81.1 million, or $0.13 per share, it reported in pro forma earnings during the same quarter last year.
The bad news was that the pro forma profit of $0.01 per share included plenty of non-operating gains, such as interest income. Without the extra boost, Yahoo! would have posted a pro forma loss of $0.03 per share. However, the company's operating metrics and online audience continues to grow -- unique visitors increased 27% to 210 million and active registered users jumped 45% to 80 million. Still, Yahoo! has been unable to display an ability to monetize its audience. The company also ended the quarter with $1.7 billion in cash.
We continue to wait for any sign Yahoo! can diversify its revenue and turn its audience into paying subscribers. Until that time, the company remains too reliant on advertising, which continues to make up about 80% of its total sales. The uncertainty surrounding its business prospects continues to make the future of Yahoo! unclear. Next week, we'll take a complete review of the company and determine its future in the Rule Maker Portfolio, as we've done with nearly every other holding. (Here are some of our recent columns on the future of Yahoo!.)
Mike Trigg doesn't own any of the companies mentioned in this story. Mike's stock holdings can be viewed online, as can The Motley Fool's disclosure policy.
