It has been about a month since the last earnings report for Pfizer (PFE Quick QuotePFE - Free Report) . Shares have added about 6.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Pfizer due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Q3 Earnings & Sales Beat; Ups 2022 Guidance

Pfizer’s third-quarter results were better than expected as it beat estimates for both earnings and sales.

Pfizer reported third-quarter 2022 adjusted earnings per share of $1.78, which significantly beat the Zacks Consensus Estimate of $1.47 per share as well as our estimate of $1.45 per share. Earnings rose 40% year over year and 44% excluding currency impact.

Revenues came in at $22.6 billion, which beat the Zacks Consensus Estimate of $21.04 billion. Sales declined 6% from the year-ago quarter on a reported basis, reflecting an operational decline of 2% and currency headwinds of 4%. More than half of Pfizer’s revenues comprised direct sales and alliance revenues from its partner, BioNTech for the COVID-19 vaccine, Comirnaty and revenues from Pfizer’s oral antiviral pill for COVID, Paxlovid.

Excluding revenues from Pfizer/BioNTech’s Comirnaty and Paxlovid, sales rose 2% operationally. Higher sales of key brands like Eliquis and Vyndaqel/Vyndamax (globally) and improved Prevnar vaccine sales in the United States were partially offset by weaker sales of Xeljanz and Ibrance globally. Also, a difficult comparison to exceptionally strong growth in the prior-year quarter resulted in the decline.

International revenues declined 43% to $8.79 billion. U.S. revenues rose 97% to $13.85 billion.

Adjusted selling, informational and administrative (SI&A) expenses rose 23% (operationally) in the quarter to $3.24 billion due to increased spending for Paxlovid and Comirnaty and new products and higher health care reform fees. Adjusted R&D expenses rose 2% to $2.69 billion due to costs related to oncology and non-COVID-19 vaccines program and costs to develop recently acquired programs.

Segment Discussion

Beginning in the third quarter of 2022, Pfizer started reporting its revenues under three broad sub-segments of its Biopharma operating segment, Primary Care, Specialty Care and Oncology. Sales in the Primary Care segment declined 1% operationally to $15.85 billion. The Specialty Care unit recorded sales of $3.4 billion, down 3%. Sales of Oncology rose 3% to $3.07 billion.

Primary Care

In Primary Care, direct sales and alliance revenues from BioNTech for Comirnaty were $4.4 billion in the quarter, down 65% year over year. Comirnaty sales rose 83% in the United States due to deliveries of the newly authorized Omicron BA.4/BA.5-adapted bivalent booster and approval for primary vaccination of children 6 months to less than 5 years of age. Comirnaty sales declined 86% in outside U.S. markets due to a shift in scheduled deliveries to the fourth quarter as well as slower demand in emerging markets. Comirnaty sales were better than our estimate of $2.74 billion.

Paxlovid contributed $7.5 billion to sales in the third quarter, compared with $8.1 billion in the second quarter, backed by launches in several countries in 2022. Paxlovid sales missed our estimate of $8.0 billion.
Alliance revenues from Bristol-Myers for Eliquis and direct sales rose 15% to $1.46 billion. Continued increased adoption in oral anti-coagulant as well as non-valvular atrial fibrillation market share gains benefited alliance revenues from Bristol-Myers for Eliquis sales in the quarter.

Global Prevnar family revenues rose 14% to $1.61 billion. The Prevnar family includes revenues from Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20 (adult). Prevnar revenues were less than the Zacks Consensus Estimate of $1.84 billion.

Prevnar sales rose 28% in the United States due to strong demand for Prevnar 20 for the eligible adult population, which offset the unfavorable timing of purchases (both government and private) of Prevnar 13 for the pediatric indication. Prevnar revenues declined 7% in international markets.

Specialty Care

Rare disease drug, Vyndaqel/Vyndamax recorded sales of $602 million in the quarter, up 29% year over year driven by continued strong uptake in the United States and developed Europe, which was partially offset by a price decrease in Japan.  Vyndaqel/Vyndamax were better than the Zacks Consensus Estimate of $589 million.
Xeljanz sales declined 14% to $502 million due to lower prescription volumes as doctors’ prescribing patterns shifted away from JAK inhibitors following label warnings.

Enbrel revenues declined 8% to $230 million due to continued biosimilar competition in key European markets and Japan.

Oncology

In Oncology, Ibrance revenues declined 3% year over year to $1.28 billion due to planned price decreases in some international developed markets and continued increase in the proportion of patients accessing Ibrance through the U.S. Patient Assistance Program. Sales missed the Zacks Consensus Estimate of $1.41 billion as well as our estimate is $1.43 billion.

Xtandi recorded alliance revenues of $320 million in the quarter, up 3% year over year. Inlyta revenues were $252 million in the quarter, up 3%.

2022 Guidance

Pfizer raised its earnings and sales guidance for 2022 as better expectations for operational growth were partially offset by incremental potential headwinds from currency impact. It also raised its outlook for the COVID-19 vaccine by $2 billion.

Revenues are expected in the range of $99.5 to $102.0 billion compared with $98.0 billion to $102.0 billion expected previously. The mid-point of the revenue guidance indicates operational growth of 31% from 2021 levels, which is higher than the prior expectation of 29%.

The revenue guidance includes approximately $34.0 billion in sales from Comirnaty, up from the prior expectation of $32 billion. Paxlovid sales are expected to be $22 billion, the same as the previous expectations. The guidance for Comirnaty reflects doses/treatment courses to be delivered under supply contracts signed as of mid-October 2022.

Adjusted earnings per share are expected to be in the range of $6.40 to $6.50 compared with the prior expectation of $6.30 to $6.45. The 19 cents improvement in operational adjusted earnings per share guidance was negatively impacted by foreign exchange movements compressing EPS by 9 cents. The mid-point of the earnings guidance indicates operational growth of 70% from the 2021 levels, which is higher than prior expectation of 65%.

Foreign exchange is expected to have a negative impact of approximately $5.7 billion on revenues and approximately 44 cents per share on EPS in 2022.

Adjusted cost of sales, as a percentage of sales, is expected in the range of 33 (previously 33). Research and development expense is expected in the range of $11.5-$12.0 billion (maintained). SI&A spending is expected in the range of $12.8-$13.3 billion versus $12.2-$13.2 billion previously. Acquired IPR&D expenses are expected to be approximately $1.4 billion (previously approximately $0.9 billion). The adjusted tax rate is expected to be approximately 12.5% (previously approximately 15.5%) in 2022.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -15.5% due to these changes.

VGM Scores

At this time, Pfizer has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Pfizer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Pfizer is part of the Zacks Large Cap Pharmaceuticals industry. Over the past month, AbbVie (ABBV Quick QuoteABBV - Free Report) , a stock from the same industry, has gained 11.5%. The company reported its results for the quarter ended September 2022 more than a month ago.

AbbVie reported revenues of $14.81 billion in the last reported quarter, representing a year-over-year change of +3.3%. EPS of $3.66 for the same period compares with $3.33 a year ago.

AbbVie is expected to post earnings of $3.68 per share for the current quarter, representing a year-over-year change of +11.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.7%.

AbbVie has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.