New York-based drugmaker and Dow-30 component Pfizer (PFE Free Pfizer Stock Report) has reported third-quarter earnings of $0.47 a share, versus $0.22 in the comparable period of 2016. The year-over-year improvement was driven primarily by continued reductions in production costs (-8%) and a steep decline in restructuring and acquisition-related expenses (-72%). Decreased SG&A (-2%) and R&D (-1) outlays, along with a 1% uptick in revenues, provided further support to the bottom line. Meantime, adjusted earnings, which exclude one-time gains, charges, and other nonrecurring items, and are more closely followed by Wall Street, came in at $0.67 a share versus $0.61 in 2016. The adjusted tally beat consensus expectations of $0.64 a share due, in part, to better-than-anticipated results in the blockbuster PREVNAR vaccine franchise. Management also raised its full-year adjusted earnings guidance to $2.58-$2.62 a share (previously $2.54-$2.60), but PFE stock traded modestly lower on the release.

In the September period, worldwide revenues advanced 1% year over year, to $13.17 billion, ending a three-quarter streak of decline. Key highlights included a solid beat in the company's top-grossing product, PREVNAR (12% of total revenue), and continued strong momentum in top oncology asset IBRANCE (sales +60%). On a segment basis, Pfizer's Innovative Health division, which sells newer, patent-protected drugs, contributed sales of $8.12 billion, representing growth of 11% year over year. In addition to IBRANCE, comps benefited from gains in rheumatoid arthritis treatment XELJANZ (+48%); blood thinner medication ELIQUIS (+43%); and a 10% uptick in the company's second-highest grossing franchise, LYRICA (9% of total revenue). This was partially offset by continued sales erosion in aging blockbusters VIAGRA (-31%) and ENBREL (-13%), and a 12% decline in Pfizer's Essential Health division, which sells older, mostly off-patent drugs. Management narrowed its 2017 full-year revenue outlook to $52.4 billion-$53.1 billion (previously $52 billion-$54 billion).

Looking ahead, Pfizer's core product lineup is set to face some pressure in the coming years. While PREVNAR beat last quarter, the vaccine's sales remain in decline due to softening demand for the adult indication. Reductions in VIAGRA and ENBREL are also likely to persist due to exclusivity losses in major markets, and LYRICA's U.S. patent is scheduled to expire in 2018. Given that these four products combined account for more than a quarter of Pfizer's total revenue, further development of the new product cycle and pipeline will be imperative. We wouldn't be surprised if management turned to M&A as another avenue to reignite growth.

All told, we continue to view high-quality Pfizer stock as an attractive core holding within the large pharma space. The company has strong finances, high-grade fundamentals, and an impressive track record. An above-average dividend yield and expectations for continued stock repurchase should enhance shareholder value.

About The CompanyPfizer is a major producer of pharmaceuticals. The company is engaged in discovering, developing, and manufacturing of healthcare products. Important product names include LYRICA (nerve and muscle pain); PREVNAR (vaccine); ENBREL (arthritis, psoriasis, and more); IBRANCE (advanced breast cancer) and CELEBREX (osteoarthritis, rheumatoid arthritis). The company acquired injectable drugmaker Hospira in 2015 and medical devices producer Medivation in 2016.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.