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business newsSay No to Pfizer Drugs
Acquisition of Wyeth not enough to get investors experimenting.
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So how does the outlook appear, say, a year or so out? Mixed at best.
Let’s take a quick gander at its $68 billion planned purchase of Wyeth (WYE), shall we?
To be clear, Wyeth does bring something to the table. After all, it just finished up a year where it generated more than $20 billion in revenue. To boot, it has Prevnar - a vaccine that’s shown some nice growth. And it would certainly give Pfizer additional diversity in terms of product offerings. Again, all plusses in my book.
But at the end of the day, Wyeth is no small fish. It could take a great deal of time for Pfizer to really wrap its arms around what it’s acquiring, identify synergies, and find ways to drive the combined company’s top-line revenue.
Will Pfizer shareholders be patient?
I suspect that shareholders are an anxious lot at this point, with the stock more than 30% off its 52-week high. I think they want action -- now -- but I don’t think that’s really what they'll be getting with a Wyeth combination. According to the release, “the deal is expected to be accretive to Pfizer’s adjusted diluted earnings per share in the second full year after closing.”
That might as well be an eternity at this point.
On top of that, it indicated its dividend will be $0.16 in the second quarter. That’s a steep decline from the $0.32 dividend for March. Frankly, I think that could turn off a host of existing investors. I know that 7%-plus yield had been a bit exciting for me.
What can (or will) Pfizer pull out of its hat from here in the coming months? It’s going to drop a lot of precious dough on Wyeth, and its focus is likely to be on getting the deal done. So what else does the board or management have up its sleeve that’s going to impress the Street and cause investors to want to get involved at this point?
The bottom line here: I see no reason to get involved in Pfizer right now. From where I sit, it won’t be easy to swallow such a big fish. In addition, the payoff in terms of dollars and cents seems pretty far away.
Seems mom was right when she said “don’t do drugs.”
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