Microsoft Excel LibreOffice Calc

Pfizer Inc. (PFE)


Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

The investments are comprised of the following: trading funds and securities, available-for-sale securities, held-to-maturity securities (when Pfizer has both the positive intent and ability to hold the investment to maturity) and private equity securities. The classification of an investment can depend on the nature of the investment, the intent and ability to hold the investment, and the degree to which Pfizer may exercise influence.

  • Trading securities are carried at fair value, with changes in fair value reported in Other (income)/deductions—net.
  • Available-for-sale debt securities are carried at fair value, with changes in fair value reported in Other comprehensive income/(loss) until realized.
  • Held-to-maturity debt securities are carried at amortized cost.
  • Private equity securities are carried at equity-method or at cost. For equity investments where Pfizer has significant influence over the financial and operating policies of the investee, Pfizer uses the equity-method of accounting. Under the equity-method, Pfizer records the share of the investee’s income and expenses in Other (income)/deductions—net. The excess of the cost of the investment over Pfizer’s share of the equity of the investee as of the acquisition date is allocated to the identifiable assets of the investee, with any remaining excess amount allocated to goodwill. Such investments are initially recorded at cost, which typically does not include amounts of contingent consideration.

Realized gains or losses on sales of investments are determined by using the specific identification cost method.

Pfizer regularly evaluates all of the financial assets for impairment. For investments in debt and equity securities, when a decline in fair value, if any, is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established.

Source: 10-K (filing date: 2019-02-28).


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Pfizer Inc., adjustment to Net Income Attributable To Pfizer Inc.

US$ in millions

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12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income attributable to Pfizer Inc. (as reported) 11,153  21,308  7,215  6,960  9,135 
Add: Available-for-sale securities (469) 532  96  (5) (372)
Net income attributable to Pfizer Inc. (adjusted) 10,684  21,840  7,311  6,955  8,763 

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-29), 10-K (filing date: 2015-02-27).


Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Pfizer Inc., adjusted ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net Profit Margin
Reported net profit margin 20.79% 40.55% 13.66% 14.25% 18.42%
Adjusted net profit margin 19.92% 41.56% 13.84% 14.24% 17.67%
Return on Equity (ROE)
Reported ROE 17.59% 29.88% 12.12% 10.75% 12.81%
Adjusted ROE 16.85% 30.63% 12.28% 10.75% 12.29%
Return on Assets (ROA)
Reported ROA 7.00% 12.40% 4.20% 4.16% 5.40%
Adjusted ROA 6.70% 12.71% 4.26% 4.15% 5.18%

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-29), 10-K (filing date: 2015-02-27).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Pfizer Inc.’s adjusted net profit margin improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Pfizer Inc.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Pfizer Inc.’s adjusted ROA improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

Pfizer Inc., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Pfizer Inc. 11,153  21,308  7,215  6,960  9,135 
Revenues 53,647  52,546  52,824  48,851  49,605 
Ratio
Net profit margin1 20.79% 40.55% 13.66% 14.25% 18.42%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Pfizer Inc. 10,684  21,840  7,311  6,955  8,763 
Revenues 53,647  52,546  52,824  48,851  49,605 
Ratio
Adjusted net profit margin2 19.92% 41.56% 13.84% 14.24% 17.67%

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-29), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Net profit margin = 100 × Net income attributable to Pfizer Inc. ÷ Revenues
= 100 × 11,153 ÷ 53,647 = 20.79%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Pfizer Inc. ÷ Revenues
= 100 × 10,684 ÷ 53,647 = 19.92%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Pfizer Inc.’s adjusted net profit margin improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

Adjusted Return on Equity (ROE)

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Pfizer Inc. 11,153  21,308  7,215  6,960  9,135 
Total Pfizer Inc. shareholders’ equity 63,407  71,308  59,544  64,720  71,301 
Ratio
ROE1 17.59% 29.88% 12.12% 10.75% 12.81%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Pfizer Inc. 10,684  21,840  7,311  6,955  8,763 
Total Pfizer Inc. shareholders’ equity 63,407  71,308  59,544  64,720  71,301 
Ratio
Adjusted ROE2 16.85% 30.63% 12.28% 10.75% 12.29%

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-29), 10-K (filing date: 2015-02-27).

2018 Calculations

1 ROE = 100 × Net income attributable to Pfizer Inc. ÷ Total Pfizer Inc. shareholders’ equity
= 100 × 11,153 ÷ 63,407 = 17.59%

2 Adjusted ROE = 100 × Adjusted net income attributable to Pfizer Inc. ÷ Total Pfizer Inc. shareholders’ equity
= 100 × 10,684 ÷ 63,407 = 16.85%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Pfizer Inc.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

Adjusted Return on Assets (ROA)

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Pfizer Inc. 11,153  21,308  7,215  6,960  9,135 
Total assets 159,422  171,797  171,615  167,460  169,274 
Ratio
ROA1 7.00% 12.40% 4.20% 4.16% 5.40%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Pfizer Inc. 10,684  21,840  7,311  6,955  8,763 
Total assets 159,422  171,797  171,615  167,460  169,274 
Ratio
Adjusted ROA2 6.70% 12.71% 4.26% 4.15% 5.18%

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-29), 10-K (filing date: 2015-02-27).

2018 Calculations

1 ROA = 100 × Net income attributable to Pfizer Inc. ÷ Total assets
= 100 × 11,153 ÷ 159,422 = 7.00%

2 Adjusted ROA = 100 × Adjusted net income attributable to Pfizer Inc. ÷ Total assets
= 100 × 10,684 ÷ 159,422 = 6.70%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Pfizer Inc.’s adjusted ROA improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.