CORPORATESISSUER COMMENT 30 NOVEMBER 2015PFIZER, INC. (PFE)Moodys Senior Unsecured Rating A1Moodys Outlook STABond-Implied Rating A1CDS-Implied Rating A1EDF-Implied Rating Aa2As of 11/27/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewPfizer: Market-Implied Ratings Fall after Allergan Merger Announcement Pfizers bond-, CDS- and EDF'-implied ratings each declined over the last month (Figure 1). Investors possibly reacted to the proposed merger with Allergan, resulting in a one-notch drop in each market-implied rating (please see the MIS discussion of the merger below).The companys bond-implied rating slipped to A1, its weakest level of the last year (save for a single day, September 8, when it slipped to A2). The CDS-implied rating also weakened to A1, matching its lowest level since May 2012. The EDF-implied rating retreated to Aa2, which matches its lowest observation over the prior 12 months.FIGURE 1. PFIZER: MOODYS AND MARKET-IMPLIED RATINGS, LAST 30 DAYS (DAILY DATA)MOODY'S ANALYTICS CORPORATES2 30 NOVEMBER 2015 MARKET SIGNALS REVIEW: PFIZER: MARKET-IMPLIED RATINGS FALL AFTER ALLERGAN MERGER ANNOUNCEMENTAccording to our ratings gap-conditioned transition matrices, companies rated A1 with a bond-implied rating of A1 outperformed the broad market 24% of the time over the following 12 months, matched the markets performance 9% of the time, and underperformed the broad market 67% of the time.Readers will recall that when a market-implied rating is unchanged, the underlying securities have matched the performance of the broad market. However, when an implied rating falls, as occurred with Pfizer, the underlying securities have underperformed the broad market.The market-implied ratings gaps are ...
