(Bloomberg Gadfly) -- Pfizer Inc. and Eli Lilly & Co. both had good news this week, reporting fourth-quarter earnings and revenue that beat analyst estimates and offering optimistic, tax-cut-bolstered guidance for 2018. And both firms saw their share prices tumble anyway.
For once, these companies can credibly blame a third party for their woes: AbbVie Inc. and its astounding tax-rate forecast.
AbbVie last week said it expects its effective tax rate to drop to just 9 percent in 2018, from 18.9 percent last year. The company expects that rate to rise through 2022, as it invests more in the U.S. -- to a mere 13 percent. This was such a stunning forecast that share prices across the sector jumped. Pfizer shares rose nearly 5 percent that day, and Eli Lilly's 2 percent, in the absence of other company-specific news.
Pfizer and Lilly, in contrast, expect to pay tax rates of 17 and 18 percent, respectively, this year. While both rates are significantly lower than what they pay now, they pale in comparison to AbbVie's forecast.
These post-earnings share-price drops may have other causes. The most exciting thing going for Pfizer right now is a possible sale of its consumer business. And Lilly said Wednesday that it won't tell investors about its plans for its Elanco animal-health business until July.
But it's likely AbbVie's tax-rate forecast anchored investor expectations lower than what many companies can promise, and investors are punishing companies that miss the mark.
It's somewhat unfair to judge Lilly and Pfizer by this outlier. All sorts of things could be widening the gap between their tax forecasts and AbbVie's, from accounting methods to overly generous interpretations of the law.
But these companies and others in the space will probably keep suffering from unflattering comparisons to AbbVie until new evidence suggests they shouldn't.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.
To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.
©2018 Bloomberg L.P.
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