The Zacks Analyst Blog Highlights: Pfizer, Kohlberg Kravis Roberts, Anadarko Petroleum, ConocoPhillips and Exxon Mobil

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May 04, 2011, 09:30 ET

CHICAGO, May 4, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Pfizer Inc. (NYSE: PFE), Kohlberg Kravis Roberts & Co L.P. (NYSE: KKR), Anadarko Petroleum Corporation (NYSE: APC), ConocoPhillips (NYSE: COP) and Exxon Mobil Corp. (NYSE: XOM).

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Here are highlights from Tuesday's Analyst Blog:

Pfizer Tops EPS, Misses Revs

Pfizer Inc. (NYSE: PFE) reported first quarter earnings of 60 cents per share, a couple of cents above the Zacks Consensus Estimate, and flat from the year-ago period. First quarter revenues declined 0.4% to $16.5 billion, just shy of the Zacks Consensus Estimate of $16.6 billion. First quarter 2011 results include the impact of the King acquisition from Jan 31, 2011.

Including one-time items, earnings increased 12% to 28 cents mainly due to lower costs, a lower tax rate and a lower share count.

Pipeline Update

Pfizer, which reduced its R&D guidance earlier this year, expects to present phase III data on several candidates including tofacitinib (rheumatoid arthritis), axitinib (renal cell carcinoma), Prevnar/Prevenar 13 (prevention of pneumococcal disease in adults) and Eliquis (stroke prevention in patients with atrial fibrillation) in 2011. Pfizer also expects to present phase II data on crizotinib for non-small cell lung cancer.

Pfizer has initiated the submission of a rolling NDA for crizotinib. Regulatory filings for other candidates including tofacitinib and Eliquis in both the US and the EU are scheduled to be submitted by the end of the year.

Meanwhile, the company is evaluating its business portfolio in order to maximize returns. Pfizer expects to complete this evaluation in the second half of the year. Pfizer struck a deal with Kohlberg Kravis Roberts & Co L.P. (NYSE: KKR) in April 2011 for the sale of its Capsugel unit.

2011 Guidance Maintained

Pfizer maintained its guidance for 2011. The company expects 2011 earnings in the range of $2.16 - $2.26 per share on revenues of $65.2 - $67.2 billion. While SI&A expenses are expected in the range of $19.2 - $20.2 billion, R&D expenses are expected in the range of $8.0- $8.5 billion. The Zacks Consensus Estimate is currently $2.23.

Pfizer also maintained its 2012 earnings guidance. The company expects to earn $2.25 - $2.35 per share on revenues of $62.2 and $64.7 billion. The Zacks Consensus Estimate is currently $2.27.

The company expects to spend $6.5 - $7.0 billion on R&D. Pfizer intends to focus on those disease areas which represent higher potential. SI&A spend is expected in the range of $17.5 - $18.5 billion.

Lower R&D spend and share buybacks should help drive earnings. The company repurchased about $1.4 billion, or 73.5 million shares, during the first quarter of 2011 and about $2.2 billion, or 110.5 million shares, through April 30, 2011. Pfizer expects to spend $5 billion - $7 billion on share repurchases in 2011. This includes the proceeds that Pfizer will receive from the sale of Capsugel.

We currently have a Neutral recommendation on Pfizer, which carries a Zacks #3 Rank (short-term Hold rating). Near-term earnings growth will come in the form of cost-cutting and share repurchases. Longer term growth will be dependent on the success of drug development.

Anadarko Kick-Starts 2011

Independent oil and gas producer Anadarko Petroleum Corporation's (NYSE: APC) operating earnings of 72 cents per share in the first quarter showed a positive surprise of 26.3% rising significantly above the Zacks Consensus Estimate of 57 cents. On a year-over-year comparison, however, operating earnings dipped 11% from 81 cents reported in first quarter 2010.

On a GAAP basis, Anadarko's net earnings of 43 cents per share in the first quarter lagged the year ago earnings of $1.43 per share.

Revenue

Anadarko's revenue of $3.25 billion in the reported quarter rose 5% from the Zacks Consensus Estimate of $3.1 billion. Quarterly revenue also grew 3.6% from $3.14 billion in the year-ago quarter. The year-over-year increase was primarily due to better realizations for oil and NGLs, offset slightly by poor natural gas prices in the quarter.

Operational Highlights

Sales volumes in the quarter of 62 million barrels of oil equivalent (MMBOE) or 690 thousand BOE per day (MBOE/d) were in line with the year-ago production levels. Anadarko's sales volumes benefited from the company's first oil lifting at the Jubilee field in Ghana, as well as continued production growth in the Eagleford and Marcellus shale plays.

Also, Anadarko achieved excellent results for its deepwater exploration program in the quarter with three discoveries and three successful offshore appraisal wells.

Daily sales volumes of crude oil & condensate, natural gas and natural gas liquids (NGL) averaged 212,000 barrels (down 4.5%), 2.4 billion cubic feet (up 0.8%) and 76,000 barrels (up 16.9%), respectively.

Commodity price realizations remained robust during the first quarter with significant improvement in oil and NGL prices while natural gas prices slumped compared to last year. Realized prices for crude oil and condensate, natural gas and NGL averaged $94.58 per barrel (up 25.8%), $3.93 per thousand cubic feet (down 21.7%) and $48.86 per barrel (up 4.8%), respectively.

At the start of the second quarter, Anadarko closed its $1.6 billion joint venture with KNOC (Korea National Oil Corporation) in the Eagleford Shale, validating the tremendous embedded value of this resource. Additionally, the company also announced the acquisition of the Wattenberg Processing Plant in northeastern Colorado, which will improve field recoveries and allow for future expansion in the greater Denver-Julesburg Basin.

Financials

Anadarko is also focused on strengthening its balance sheet and enhancing its financial flexibility and liquidity. The company ended its first quarter 2011 with roughly $3.5 billion of cash on hand and maintained access to its $5 billion undrawn credit facility.

As of March 31, 2011, Anadarko had a total debt of $13.2 billion and net debt of $9.7 billion. It had a total debt-to-capitalization ratio of 39% at quarter-end.

Cash flow from operations in the first quarter was $1.29 billion compared to $1.32 billion in the first quarter of 2010. Capital expenditure in the reported quarter summed to $1.59 billion with discretionary cash flows of $1.67 billion. As a result, the company had a free cash flow of $87 million as of March 31, 2010.

Outlook

Following the solid first quarter results, Anadarko provided its expectations for the second quarter and the full-year 2011. The company expects total sales for the second quarter to come in the range of 60-62 MMBoe, while full-year sales estimate is in the 244-248 MMboe range.

Anadarko projected other revenues, including Marketing & Gathering and Minerals & Other, to come in the ranges of $50-$70 million and $35-$45 million for the second quarter 2011. For full year 2011, Marketing and Gathering revenue is expected to be in the $225-$275 million range and the Minerals & Other revenue is expected to reach the $110-$140 million range.

Going forward, Anadarko's estimated 2011 capital expenditures have been increased by about $600 million as a result of the Wattenberg Processing Plant acquisition. The estimated capital spending range for 2011 is now at $6.2 to $6.6 billion, excluding capital expenditures related to Western Gas Partners L.P. Total capital spending for the second quarter is expected to be in the range of $1.8-$1.9 billion.

Our View

Based in The Woodlands, Texas, Anadarko Petroleum is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and NGLs. The company primarily competes with ConocoPhillips (NYSE: COP) and Exxon Mobil Corp. (NYSE: XOM).

Anadarko currently has a Zacks #2 Rank (short term Buy). We maintain our long term Neutral recommendation on the stock.

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