Pfizer Inc. (PFE - Analyst Report) posted fourth quarter 2015 earnings of 53 cents per share, a penny above the Zacks Consensus Estimate but down 2% from the year-ago period.

Revenues, which grew 7% to $14.047 billion, were well above the Zacks Consensus Estimate of $13.605 billion.

Full year earnings came in at $2.20 per share, down 3%, while revenues declined 2% to $48.851 billion.

Prevnar, Ibrance Perform Well

While currency movement cut Pfizer’s fourth quarter revenues by 7% ($934 million), operational growth was 14% ($1.9 billion). International revenues declined 9% to $7.3 billion. Meanwhile, U.S. revenues grew 33% to $6.7 billion.

Although the standalone Global Established Pharmaceutical (GEP) and Consumer Healthcare segments recorded a decline in revenues, the Global Innovative Pharmaceutical (GIP), Global Oncology and Global Vaccines segments recorded growth.

The standalone GEP segment recorded a 21% decline in revenues, which came in at $5.1 billion. Factors like the presence of generic competition for Celebrex, the Jan 2015 entry of generic competition for Zyvox IV and Lyrica in certain developed EU markets affected revenues.

GIP segment revenues grew 3% to $3.9 billion reflecting the strong performance of Lyrica in the U.S. and Japan, Xeljanz in the U.S. and Eliquis across the world.

Consumer Healthcare revenues declined 2% to $930 million. Nexium 24HR demand in the U.S. remained strong.

Global Oncology revenues increased 52% to $928 million with performance being driven by Xalkori, Sutent and recently launched Ibrance which contributed $315 million to sales, significantly above third quarter 2015 sales of $230 million.

Global Vaccine revenues grew 45% to $1.9 billion. Prevnar 13 was positively impacted by continued strong uptake among adults reflecting the success of commercial programs, increased demand in the flu season as well as the timing of government purchases for the pediatric indication.

Selling, informational and administrative (SI&A) expenses grew 17% to $4.6 billion during the quarter. R&D expenses increased 14% to $2.3 billion.

2016 Guidance Lags

Pfizer expects 2016 earnings of $2.20 - $2.30 per share on revenues of $49 billion - $51 billion. The Zacks Consensus Estimate for earnings and revenues is currently $2.38 per share and $52.5 billion, respectively.

Pfizer expects SI&A spend of $13.2 billion - $14.2 billion and R&D spend of $7.3 billion - $7.8 billion.

While the guidance does not include the impact of the upcoming combination with Allergan (AGN - Analyst Report), scheduled to close in the second half of 2016, Pfizer expects genericization to have a negative impact of $2.3 billion and unfavorable currency movement to impact revenues by $2.3 billion (including $0.8 billion due to the estimated significant currency impact related to Venezuela). Pfizer expects to buy back shares worth $5 billion in 2016.

Our Take

Pfizer’s fourth quarter results surpassed expectations with the company beating on both the top- and bottom-line. However, the company’s 2016 outlook fell short of expectations.

While we believe genericization, unfavorable currency movement and the expiration of a few co-promotion agreements will continue to hamper top-line growth, cost-cutting efforts and share buybacks should help Pfizer achieve its earnings guidance. Moreover, the Hospira acquisition has significantly expanded Pfizer's sterile injectable and biosimilar capabilities. Pfizer has also gained access to Hospira’s lucrative biosimilar portfolio of both marketed and pipeline assets.

Pfizer is a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the health care sector include Gilead Sciences Inc. (GILD - Analyst Report) and Celgene Corp. (CELG - Analyst Report) -- both are Zacks Rank #1 (Strong Buy) stocks.