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Pfizer (PFE) Stock Falls on Q1 Sales Miss, Earnings Beat
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Pfizer, Inc. (PFE - Free Report) reported first-quarter 2018 adjusted earnings per share of 77 cents, which beat the Zacks Consensus Estimate of 74 cents by 4.1%. Earnings rose 12% year over year as lower tax rates and share count, due to aggressive share repurchases in the quarter, made up for a weaker sales performance and higher R&D costs.
The pharma heavyweight recorded revenues of $12.91 billion, which missed the Zacks Consensus Estimate of $13.09 billion. Revenues however rose 1% from the year-ago quarter on a reported basis due to positive impact of currency changes. Currency movement benefited Pfizer’s first-quarter revenues by 3%. However, on an operational basis, excluding the impact of currency, revenues declined 2% year over year.
International revenues rose 8% (up 1% an operational basis) to $6.63 billion. U.S. revenues declined 5% to $6.28 billion.
Segment Discussion
Pfizer’s reporting segments are Pfizer Innovative Health (IH) and Pfizer Essential Health (EH).
Pfizer IH sales grew 6% on a reported basis (up 3% an operational basis) from the year-ago period to $7.83 billion.
While Ibrance and Eliquis did well in the quarter, IH segment revenues were hurt by lower sales of Enbrel, Lyrica and Prevnar 13/Prevenar 13. Meanwhile, unfavorable customer buying patterns somewhat hurt sales of Ibrance, Xeljanz and certain other products.
Ibrance revenues rose 35% to $933 million in the quarter. Xeljanz sales rose 29% to $326 million. Lyrica sales declined 1% to $1.13 billion. Eliquis alliance revenues and direct sales rose 30% to $765 million. Chantix sales rose 3% to $251 million in the quarter.
Revenues from blockbuster prostate cancer drug, Xtandi, added to Pfizer’s portfolio following the September 2016 Medivation acquisition, also contributed to U.S. revenues. Xtandi recorded alliance revenues of $159 million in the quarter compared with $168 million in the previous quarter.
This was partially offset by continued decline in revenues from Prevnar 13 in the United States and lower revenues of Enbrel.
Enbrel revenues declined 21% to $506 million in key European markets due to biosimilar competition. Pfizer has exclusive rights to Amgen, Inc.’s (AMGN - Free Report) blockbuster rheumatoid arthritis(RA) drug, Enbrel, outside the United States and Canada.
Global Prevnar 13/Prevenar 13 revenues declined 3% to $1.38 billion as higher international sales made up for the decline in the United States. Prevnar 13 revenues tanked 12% in the United States due to lower government purchases than last year for the pediatric indication and continued decline in revenues for the adult indication. However, Prevenar 13 revenues rose 16% in international markets.
Revenues from the Consumer Healthcare segment, which Pfizer is considering selling, rose 4% to $905 million. Global Oncology revenues increased 23% to $1.7 billion. Global Vaccine revenues declined 3% to $1.46 billion. Internal Medicine declined 3% to $2.35 billion. The Inflammation & Immunology franchise declined 5% to $869 million. Additionally, the portfolio of Rare Disease rose 2% to $549 million.
EH revenues were hurt by the loss of exclusivity and associated generic competition for products, primarily Pristiq in the United States and Lyrica in Europe and lower revenues from legacy Hospira products due to product shortages. Viagra sales declined 46% to $187 million due to generic competition that began in December 2017.
However, in the EH business, biosimilars and emerging markets did well in the quarter. Biosimilars revenues rose 53% operationally while emerging markets revenues grew 12% operationally.
Pfizer launched Inflectra, a biosimilar version of Johnson & Johnson (JNJ - Free Report) and Merck’s (MRK - Free Report) blockbuster RA drug Remicade, in November last year. While Inflectra recorded sales of $55 million in the United States and $145 million globally, other biosimilars brought in sales of $29 million (down 5%) from outside the U.S. markets.
Adjusted selling, informational and administrative (SI&A) expenses declined 3% (operationally) in the quarter to $3.29 billion. Adjusted R&D expenses rose 1% to $1.74 billion.
In the quarter, Pfizer bought back shares worth $6.1 billion, including $2.1 billion of open-market share repurchases and $4.0 billion in accelerated share repurchase agreement executed in March 2018.
2018 Guidance
Revenues are expected in the range of $53.5 billion to $55.5 billion. Adjusted earnings per share are expected in the range of $2.90 - $3.00. At the mid-point, adjusted EPS is expected to increase 11% while revenues are expected to increase 4%.
Research and development expenses are likely to be in the range of $7.4–$7.9 billion while SI&A spending is projected in the range of $14.0–$15.0 billion.
Adjusted tax rate is expected to be 17% in 2018, 300 basis points less than 20% in 2017 due to expected advantage from U.S. tax reform.
Our Take
Pfizer’s first-quarter results were mixed as it beat estimates for earnings while missing the same for revenues. Meanwhile, it re-affirmed its previously issued guidance for 2018.
Shares of Pfizer fell around 2.2% in pre-market trading on lower-than-expected sales in the quarter. The top-line was hurt by declines in sales of key drugs like Lyrica, Prevnar 13/Prevenar 13, and Enbrel. Also, loss of exclusivity for some products like Viagra and continued supply shortages in legacy Hospira products hurt revenues.
This year so far, Pfizer’s shares have increased 2%, against a decrease of 3.1% for the industry.
Pfizer faces top-line headwinds in the form of genericization of key drugs, supply shortages in legacy Hospira products, pricing pressure and rising competition. However, we believe that new products like Ibrance, contribution from acquisitions, cost-cutting efforts, a lower tax rate and share buybacks will help the company achieve its guidance. Pfizer looks well poised to record profit growth in 2018.
Pfizer also boasts a strong pipeline and expects approximately 25 to 30 drug approvals over the next five years, including around 15 products that have blockbuster potential.
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Pfizer (PFE) Stock Falls on Q1 Sales Miss, Earnings Beat
Pfizer, Inc. (PFE - Free Report) reported first-quarter 2018 adjusted earnings per share of 77 cents, which beat the Zacks Consensus Estimate of 74 cents by 4.1%. Earnings rose 12% year over year as lower tax rates and share count, due to aggressive share repurchases in the quarter, made up for a weaker sales performance and higher R&D costs.
The pharma heavyweight recorded revenues of $12.91 billion, which missed the Zacks Consensus Estimate of $13.09 billion. Revenues however rose 1% from the year-ago quarter on a reported basis due to positive impact of currency changes. Currency movement benefited Pfizer’s first-quarter revenues by 3%. However, on an operational basis, excluding the impact of currency, revenues declined 2% year over year.
International revenues rose 8% (up 1% an operational basis) to $6.63 billion. U.S. revenues declined 5% to $6.28 billion.
Segment Discussion
Pfizer’s reporting segments are Pfizer Innovative Health (IH) and Pfizer Essential Health (EH).
Pfizer IH sales grew 6% on a reported basis (up 3% an operational basis) from the year-ago period to $7.83 billion.
While Ibrance and Eliquis did well in the quarter, IH segment revenues were hurt by lower sales of Enbrel, Lyrica and Prevnar 13/Prevenar 13. Meanwhile, unfavorable customer buying patterns somewhat hurt sales of Ibrance, Xeljanz and certain other products.
Ibrance revenues rose 35% to $933 million in the quarter. Xeljanz sales rose 29% to $326 million. Lyrica sales declined 1% to $1.13 billion. Eliquis alliance revenues and direct sales rose 30% to $765 million. Chantix sales rose 3% to $251 million in the quarter.
Revenues from blockbuster prostate cancer drug, Xtandi, added to Pfizer’s portfolio following the September 2016 Medivation acquisition, also contributed to U.S. revenues. Xtandi recorded alliance revenues of $159 million in the quarter compared with $168 million in the previous quarter.
This was partially offset by continued decline in revenues from Prevnar 13 in the United States and lower revenues of Enbrel.
Enbrel revenues declined 21% to $506 million in key European markets due to biosimilar competition. Pfizer has exclusive rights to Amgen, Inc.’s (AMGN - Free Report) blockbuster rheumatoid arthritis(RA) drug, Enbrel, outside the United States and Canada.
Global Prevnar 13/Prevenar 13 revenues declined 3% to $1.38 billion as higher international sales made up for the decline in the United States. Prevnar 13 revenues tanked 12% in the United States due to lower government purchases than last year for the pediatric indication and continued decline in revenues for the adult indication. However, Prevenar 13 revenues rose 16% in international markets.
Revenues from the Consumer Healthcare segment, which Pfizer is considering selling, rose 4% to $905 million. Global Oncology revenues increased 23% to $1.7 billion. Global Vaccine revenues declined 3% to $1.46 billion. Internal Medicine declined 3% to $2.35 billion. The Inflammation & Immunology franchise declined 5% to $869 million. Additionally, the portfolio of Rare Disease rose 2% to $549 million.
Pfizer EH segment sales declined 5% (down 9% operationally) to $5.08 billion.
EH revenues were hurt by the loss of exclusivity and associated generic competition for products, primarily Pristiq in the United States and Lyrica in Europe and lower revenues from legacy Hospira products due to product shortages. Viagra sales declined 46% to $187 million due to generic competition that began in December 2017.
However, in the EH business, biosimilars and emerging markets did well in the quarter. Biosimilars revenues rose 53% operationally while emerging markets revenues grew 12% operationally.
Pfizer launched Inflectra, a biosimilar version of Johnson & Johnson (JNJ - Free Report) and Merck’s (MRK - Free Report) blockbuster RA drug Remicade, in November last year. While Inflectra recorded sales of $55 million in the United States and $145 million globally, other biosimilars brought in sales of $29 million (down 5%) from outside the U.S. markets.
Adjusted selling, informational and administrative (SI&A) expenses declined 3% (operationally) in the quarter to $3.29 billion. Adjusted R&D expenses rose 1% to $1.74 billion.
In the quarter, Pfizer bought back shares worth $6.1 billion, including $2.1 billion of open-market share repurchases and $4.0 billion in accelerated share repurchase agreement executed in March 2018.
2018 Guidance
Revenues are expected in the range of $53.5 billion to $55.5 billion. Adjusted earnings per share are expected in the range of $2.90 - $3.00. At the mid-point, adjusted EPS is expected to increase 11% while revenues are expected to increase 4%.
Research and development expenses are likely to be in the range of $7.4–$7.9 billion while SI&A spending is projected in the range of $14.0–$15.0 billion.
Adjusted tax rate is expected to be 17% in 2018, 300 basis points less than 20% in 2017 due to expected advantage from U.S. tax reform.
Our Take
Pfizer’s first-quarter results were mixed as it beat estimates for earnings while missing the same for revenues. Meanwhile, it re-affirmed its previously issued guidance for 2018.
Shares of Pfizer fell around 2.2% in pre-market trading on lower-than-expected sales in the quarter. The top-line was hurt by declines in sales of key drugs like Lyrica, Prevnar 13/Prevenar 13, and Enbrel. Also, loss of exclusivity for some products like Viagra and continued supply shortages in legacy Hospira products hurt revenues.
This year so far, Pfizer’s shares have increased 2%, against a decrease of 3.1% for the industry.
Pfizer faces top-line headwinds in the form of genericization of key drugs, supply shortages in legacy Hospira products, pricing pressure and rising competition. However, we believe that new products like Ibrance, contribution from acquisitions, cost-cutting efforts, a lower tax rate and share buybacks will help the company achieve its guidance. Pfizer looks well poised to record profit growth in 2018.
Pfizer also boasts a strong pipeline and expects approximately 25 to 30 drug approvals over the next five years, including around 15 products that have blockbuster potential.
Pfizer carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Pfizer Inc. Price, Consensus and EPS Surprise
Pfizer Inc. Price, Consensus and EPS Surprise | Pfizer Inc. Quote
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