Pfizer’s fourth-quarter profit got a boost from a huge tax benefit related to the U.S. tax overhaul but it expects to pay tax this year at a higher rate than investors expected.
The largest U.S. drug maker on Tuesday reported net income of $12.3 billion, or $2.02 per share, up from $775 million, or 13 cents a share, a year ago. It cited a favorable impact of about $10.7 billion on its provision for taxes, primarily reflecting the remeasurement of its deferred tax liabilities since the Tax Cuts and Jobs Act became law.
Excluding items, Pfizer earned an adjusted 62 cents per share, beating analysts’ estimates of 56 cents. Revenue of $13.7 billion was in line with expectations.
“Overall, I am pleased with our 2017 financial performance,” CFO Frank D’Amelio said in a news release. “Despite absorbing a $2.1 billion impact from products that recently lost marketing exclusivity, we were still able to achieve 1% operational revenue growth in 2017 after excluding the net impact of acquisitions and divestitures completed in 2016 and 2017.”
For 2018, Pfizer forecasts revenue between $53.5 billion to $55.5 billion and adjusted earnings per share ranging $2.90 to $3, above Wall Street estimates of $53.9 billion and $2.78 per share, respectively.
But it also expects an adjusted tax rate of 17.0%. Its shares, which had jumped on Friday after rival AbbVie projected a rate of just 9%, fell 3.1% on Tuesday to $37.80.
“What you’re getting is a selloff based on people anticipating [Pfizer’s new tax rate] was going to be lower,” SunTrust Robinson Humphrey analyst John Boris told Reuters.
In the fourth quarter, Pfizer’s sales growth was driven by the anti-epileptic drug Lyrica, the Prevnar 13 pneumococcal vaccine, and several newer medicines, including clot-preventer Eliquis and rheumatoid arthritis pill Xeljanz.
“We saw continued growth of new brands and received a record number of new approvals,” CEO Ian Read said in an earnings call. Pfizer won 10 approvals from U.S. regulators last year for additional uses for existing drugs and for new medicines, including diabetes drug Steglatro.