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Buy, Sell or Hold Pfizer Stock After Q3 Earnings Beat, Guidance Boost?
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On Oct. 29, Pfizer (PFE - Free Report) announced third-quarter results, beating estimates for earnings as well as sales. Revenues rose 32% on an operational basis, driven by higher sales of key non-COVID products like Vyndaqel and Eliquis, new product launches and newly acquired products from Seagen.
Sales of COVID products were higher than expected, driving most of the outperformance. Drugs added from last year’s Seagen acquisition contributed $854 million to the top line in the third quarter. Revenues from Pfizer’s non-COVID products rose 14% operationally in the third quarter, following a strong performance in the first half. Sales of key drugs Xeljanz and Ibrance declined in the quarter.
The company also raised its 2024 earnings and revenue expectations for the second time this year. The guidance increase was mostly driven by higher potential revenues from Paxlovid. Adjusted earnings guidance was raised from $2.45 to $2.65 per share to a range of $2.75 to $2.95. The total revenue guidance range was upped from $59.5 billion to $62.5 billion to $61.0 to $64.0 billion.
Nonetheless, a single quarter’s results are not so important for long-term investors, and the focus should, rather, be on the company’s strong fundamentals. Let’s understand the company’s strengths and weaknesses to better analyze how to play PFE’s stock in the post-earnings scenario.
Sales of PFE’s COVID Products Declining
Sales of Pfizer’s COVID products, Comirnaty and Paxlovid, declined steeply in 2023 due to lower demand following the end of the pandemic. In 2024, revenues from Paxlovid and Comirnaty continue to decline. The 2024 revenue guidance includes $10.5 billion in potential combined revenues for Paxlovid and Comirnaty, which is lower than the combined revenues of $12.5 billion for 2023. However, sales of both products were significantly more than expected in the third quarter. There is an element of uncertainty associated with sales of COVID-19 products as it depends on infection rates.
PFE’s New Drugs & Seagen Acquisition to Drive Growth
Though COVID revenues are declining, Pfizer’s non-COVID operational revenues improved in the first three quarters of 2024, driven by its key in-line products like Vyndaqel and Eliquis, new launches like Abrysvo newly acquired products like Nurtec as well as those acquired from Seagen (December 2023). The trend is expected to continue in the fourth quarter and probably in 2025.
Pfizer’s new products/late-stage pipeline candidates and newly acquired products, including those acquired from Seagen, position it strongly for operational growth in 2025 and beyond. Pfizer expects 2025 to 2030 revenue CAGR to be approximately 6%.
PFE Enjoys a Strong Position in Oncology
Pfizer is one of the largest and most successful drugmakers in the field of oncology. Its position in oncology was strengthened with the addition of Seagen, which generated sales of $2.3 billion in the first nine months of 2024, up 38% on a proforma basis. Pfizer expects the acquisition of Seagen to contribute more than $10 billion in 2030 risk-adjusted revenues with potential significant growth beyond 2030.
Oncology sales comprise more than 26% of Pfizer’s total revenues. Its oncology revenues grew 26% on an operational basis in the first nine months of 2024, driven by drugs like Xtandi, Lorbrena, Braftovi-Mektovi combination and Padcev. Pfizer has ventured into the oncology biosimilars space and markets six biosimilars for cancer. Pfizer also advanced its oncology clinical pipeline in 2024, with several candidates entering late-stage development. By 2030, it expects to have eight or more blockbuster oncology medicines in its portfolio.
Pfizer stock’s return has been unsatisfactory following the pandemic due to a steep decline in sales of its COVID-19 products. Its stock has declined 40% in the past two years. However, its performance is gradually improving.
Pfizer’s stock has declined 0.3% in the past six months against an increase of 1.6% for the industry.
PFE Stock Outperforms Industry
Image Source: Zacks Investment Research
From a valuation standpoint, Pfizer appears attractive relative to the industry and is trading below its mean. Going by the price/earnings ratio, the company shares currently trade at 9.67 forward earnings, lower than 17.91 for the industry and the stock’s mean of 11.36. The stock is also much cheaper than other large drugmakers like AbbVie (ABBV - Free Report) , Novo Nordisk (NVO - Free Report) and Lilly (LLY - Free Report) .
PFE Stock Valuation
Image Source: Zacks Investment Research
In response to the earnings beat and guidance increase, the Zacks Consensus Estimate for earnings has risen from $2.67 to $2.85 per share for 2024 over the past seven days, while that for 2025 has risen from $2.86 per share to $2.91 per share.
PFE Estimate Movement
Image Source: Zacks Investment Research
Stay Invested in PFE Stock
After a couple of tough years, it seems that Pfizer’s worst slowdown is over now, and the company is gradually making a comeback.
Pfizer faces its share of challenges, the key being declining sales of its COVID-19 products. Pfizer also expects a significant impact from the loss of patent exclusivity in the 2026-2030 period, as several of its key products will face patent expirations. However, its non-COVID drugs and potential contribution from new and newly acquired products have started to drive growth,with the trend expected to continue.
The company continues to pay regular dividends. Pfizer paid $7.1 billion of cash dividends to shareholders in the first nine months of 2024.
Its dividend yield stands at around 6%, which is quite impressive. Also, Pfizer expects cost cuts and internal restructuring to deliver savings of at least $5.5 billion. Huge profits from its COVID products strengthened its cash position. The funds are being used to make acquisitions, increase dividends, buy back shares and reduce debt.
Starboard, an activist investor in Pfizer’s stock, recently called the company’s board of directors to take action against Pfizer management for failure to earn sustainable profitability despite cost cuts, new product launches and acquisitions. The strong third-quarter performance has somewhat put the criticism to rest, at least for the time being. Addressing this issue, CEO Albert Bourla, on the third-quarter conference call, said that though they agree on some points raised by Starboard, they disagree on some others. Like Starboard, Pfizer management is also not satisfied with the stock’s return to shareholders. However, management believes that some deals made by the company, like the Seagen acquisition or the Comirnaty deal with BioNTech, have been transformational for Pfizer. Bourla also said that Pfizer has been improving its performance.
Consistently rising estimates indicate investors’ optimistic outlook for growth. Those who own this Zacks Rank #3 (Hold) stock may stay invested to see how Pfizer’s new growth drivers perform. Investors with a long-term horizon may consider buying this pharmaceutical giant’s stock at the present attractive valuation.
Image: Bigstock
Buy, Sell or Hold Pfizer Stock After Q3 Earnings Beat, Guidance Boost?
On Oct. 29, Pfizer (PFE - Free Report) announced third-quarter results, beating estimates for earnings as well as sales. Revenues rose 32% on an operational basis, driven by higher sales of key non-COVID products like Vyndaqel and Eliquis, new product launches and newly acquired products from Seagen.
Sales of COVID products were higher than expected, driving most of the outperformance. Drugs added from last year’s Seagen acquisition contributed $854 million to the top line in the third quarter. Revenues from Pfizer’s non-COVID products rose 14% operationally in the third quarter, following a strong performance in the first half. Sales of key drugs Xeljanz and Ibrance declined in the quarter.
The company also raised its 2024 earnings and revenue expectations for the second time this year. The guidance increase was mostly driven by higher potential revenues from Paxlovid. Adjusted earnings guidance was raised from $2.45 to $2.65 per share to a range of $2.75 to $2.95. The total revenue guidance range was upped from $59.5 billion to $62.5 billion to $61.0 to $64.0 billion.
Nonetheless, a single quarter’s results are not so important for long-term investors, and the focus should, rather, be on the company’s strong fundamentals. Let’s understand the company’s strengths and weaknesses to better analyze how to play PFE’s stock in the post-earnings scenario.
Sales of PFE’s COVID Products Declining
Sales of Pfizer’s COVID products, Comirnaty and Paxlovid, declined steeply in 2023 due to lower demand following the end of the pandemic. In 2024, revenues from Paxlovid and Comirnaty continue to decline. The 2024 revenue guidance includes $10.5 billion in potential combined revenues for Paxlovid and Comirnaty, which is lower than the combined revenues of $12.5 billion for 2023. However, sales of both products were significantly more than expected in the third quarter. There is an element of uncertainty associated with sales of COVID-19 products as it depends on infection rates.
PFE’s New Drugs & Seagen Acquisition to Drive Growth
Though COVID revenues are declining, Pfizer’s non-COVID operational revenues improved in the first three quarters of 2024, driven by its key in-line products like Vyndaqel and Eliquis, new launches like Abrysvo newly acquired products like Nurtec as well as those acquired from Seagen (December 2023). The trend is expected to continue in the fourth quarter and probably in 2025.
Pfizer’s new products/late-stage pipeline candidates and newly acquired products, including those acquired from Seagen, position it strongly for operational growth in 2025 and beyond. Pfizer expects 2025 to 2030 revenue CAGR to be approximately 6%.
PFE Enjoys a Strong Position in Oncology
Pfizer is one of the largest and most successful drugmakers in the field of oncology. Its position in oncology was strengthened with the addition of Seagen, which generated sales of $2.3 billion in the first nine months of 2024, up 38% on a proforma basis. Pfizer expects the acquisition of Seagen to contribute more than $10 billion in 2030 risk-adjusted revenues with potential significant growth beyond 2030.
Oncology sales comprise more than 26% of Pfizer’s total revenues. Its oncology revenues grew 26% on an operational basis in the first nine months of 2024, driven by drugs like Xtandi, Lorbrena, Braftovi-Mektovi combination and Padcev. Pfizer has ventured into the oncology biosimilars space and markets six biosimilars for cancer. Pfizer also advanced its oncology clinical pipeline in 2024, with several candidates entering late-stage development. By 2030, it expects to have eight or more blockbuster oncology medicines in its portfolio.
PFE’s Stock Performance, Rising Estimates & Valuation
Pfizer stock’s return has been unsatisfactory following the pandemic due to a steep decline in sales of its COVID-19 products. Its stock has declined 40% in the past two years. However, its performance is gradually improving.
Pfizer’s stock has declined 0.3% in the past six months against an increase of 1.6% for the industry.
PFE Stock Outperforms Industry
From a valuation standpoint, Pfizer appears attractive relative to the industry and is trading below its mean. Going by the price/earnings ratio, the company shares currently trade at 9.67 forward earnings, lower than 17.91 for the industry and the stock’s mean of 11.36. The stock is also much cheaper than other large drugmakers like AbbVie (ABBV - Free Report) , Novo Nordisk (NVO - Free Report) and Lilly (LLY - Free Report) .
PFE Stock Valuation
In response to the earnings beat and guidance increase, the Zacks Consensus Estimate for earnings has risen from $2.67 to $2.85 per share for 2024 over the past seven days, while that for 2025 has risen from $2.86 per share to $2.91 per share.
PFE Estimate Movement
Stay Invested in PFE Stock
After a couple of tough years, it seems that Pfizer’s worst slowdown is over now, and the company is gradually making a comeback.
Pfizer faces its share of challenges, the key being declining sales of its COVID-19 products. Pfizer also expects a significant impact from the loss of patent exclusivity in the 2026-2030 period, as several of its key products will face patent expirations. However, its non-COVID drugs and potential contribution from new and newly acquired products have started to drive growth,with the trend expected to continue.
The company continues to pay regular dividends. Pfizer paid $7.1 billion of cash dividends to shareholders in the first nine months of 2024.
Its dividend yield stands at around 6%, which is quite impressive. Also, Pfizer expects cost cuts and internal restructuring to deliver savings of at least $5.5 billion. Huge profits from its COVID products strengthened its cash position. The funds are being used to make acquisitions, increase dividends, buy back shares and reduce debt.
Starboard, an activist investor in Pfizer’s stock, recently called the company’s board of directors to take action against Pfizer management for failure to earn sustainable profitability despite cost cuts, new product launches and acquisitions. The strong third-quarter performance has somewhat put the criticism to rest, at least for the time being. Addressing this issue, CEO Albert Bourla, on the third-quarter conference call, said that though they agree on some points raised by Starboard, they disagree on some others. Like Starboard, Pfizer management is also not satisfied with the stock’s return to shareholders. However, management believes that some deals made by the company, like the Seagen acquisition or the Comirnaty deal with BioNTech, have been transformational for Pfizer. Bourla also said that Pfizer has been improving its performance.
Consistently rising estimates indicate investors’ optimistic outlook for growth. Those who own this Zacks Rank #3 (Hold) stock may stay invested to see how Pfizer’s new growth drivers perform. Investors with a long-term horizon may consider buying this pharmaceutical giant’s stock at the present attractive valuation.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.