Looking to top the CNBC Portfolio Challenge leader board? The following links will help; Week 10 Final Portfolio, Contest Wrap-up and Thoughts • July 18 Bonus Bucks Answers

Pfizer: The Ever-Devaluing Big Pharma Value Stock

Pfizer Inc. (PFE) Chief Executive Jeffrey Kindler said this morning at the drug maker’s annual shareholder meeting that his plan is to drive greater shareholder return. Kindler said that in 2007, the company took significant action to better position Pfizer to meet growing challenges and seize opportunities in the global marketplace for healthcare, while adding that “we are far from done – and our progress is not yet reflected in the share price.” To say that Pfizer has encountered some difficulties would be an understatement. The stock price has suffered greatly, dropping 11.7% year to date and is off 38.6% from its 52-week high of $27.73 to recently trade at a new low of $19.79. As Avery Johnson outlined in a piece in today’s Wall Street Journal, Pfizer’s prolonged troubles range from the “halting of a top drug prospect torcetrapib after a safety concern, eliminating a potential revenue replacement when anticholesterol blockbuster Lipitor faces generic competition as soon as 2010” to “dismal sales of insulin inhaler Exubera, a product…once touted as a $2 billion-a-year product.” Yet, there is some reason to be optimistic. To combat this, aggressive cost cutting measures are in the process of being implemented which could perhaps help prevent the stock from sliding even further while the company builds up its future pipeline, especially given its ultra-low valuation. In Pfizer’s latest earnings conference call on Apr. 17, management affirmed that it was on track to decrease total costs by at least $1.5 billion to $2 billion by the end of 2008. The savings, will in part come from layoffs, or what the company calls “matching workforce level with market reality.” At the end of 2006, the company had 98,000 employees but by the start of 2008, that total had been reduced to 86,600. So far this year, 1,600 additional jobs have been slashed. But it doesn’t end there. Pfizer also expects to reduce the number of manufacturing plants and has identified numerous outsourcing opportunities. The cost cutting initiatives will pay off to some degree because despite reporting first quarter income of $2.8 billion, an 18% decrease from the prior year, or $.61 per share below the consensus of $.66 per share along with disappointing Lipitor revenue of $3.1 billion, a decrease of 7% from a year earlier, the company says it will begin to recognize some of the benefits associated with its cost cutting strategy which will help it hold the line on its full year guidance; it’s keeping full year diluted earnings per share at a range of $2.35 to $2.45. Looking out over the next fiscal year, earnings are supposed to grow to $2.54 per share, the analyst consensus estimate of growth of 7.2%. Sure, Pfizer has had its share of problems and the pipeline story is currently far from scintillating, but with the stock trading at a forward PE of 8.39 and sporting a dividend yield of 6.50%, the drug maker shouldn’t be overlooked.

Related Articles

• June 18, 2008 -- Pfizer Catches a Big Break with Cholesterol Drug Lipitor
• June 5, 2008 -- Big Pharma Stock Pfizer Downgraded, Could Mark Bottom
• June 2, 2008 -- Stat of the Day: Pfizer at $19, Lowest Level Since 1997

It's that time of year again. CNBC's Million Dollar Portfolio Challenge will be getting underway on Monday, May 12. The tournament is similar in fashion to last year; each contestant receives 1 million CNBC Bucks and can trade stocks with a minimum market cap of $500 million. In addition to 10 pretty cool weekly prizes, there is a grand prize of $500,000 to the lucky contestant who finishes with the highest portfolio return. The only twist to the tournament is that currency trading is now allowed.

We'll be doing a number of things this time around to help with your trading success and so you can have better shot at winning the tournament. Follow the links below to learn more, and good luck!