It has been about a month since the last earnings report for Pfizer, Inc. (PFE - Free Report) . Shares have added about 2.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Pfizer Surpasses Q2 Earnings Estimates, Misses Sales
Pfizer’s reported second-quarter 2017 adjusted earnings per share of $0.67, which beat the Zacks Consensus Estimate of $0.65 by 3.1%. Earnings also rose 5% year over year as a weak top line performance was offset by higher gross margins and lower share count.
Revenues totaled $12.90 billion, which fell short of the Zacks Consensus Estimate of $13.02 billion. Again, revenues declined 2% from the year-ago period due to currency headwinds and divestiture of Hospira infusion systems business in Feb 2017.
Sales in Detail
Currency movement impacted Pfizer’s second-quarter revenues by 2% ($202 million). Sales growth was flat on an operational basis. Excluding HIS revenues and currency impact, sales rose 2% on an operational basis.
Lower sales of Enbrel and the Prevnar/Prevenar 13 vaccines franchise and loss of exclusivity for some products offset strong performance of key products like Ibrance (breast cancer), Xtandi (prostate cancer) and Xeljanz (rheumatoid arthritis).
International revenues declined 3% (flat on an operational basis) to $6.55 billion. Meanwhile, U.S. revenues were flat at $6.34 billion.
From the second quarter of 2016, Pfizer reorganized its reporting segments to Pfizer Innovative Health (IH) and Pfizer Essential Health (EH).
Pfizer IH sales grew 8% (up 9% operationally) from the year-ago period to $7.67 billion.
Pfizer IH revenues were driven by persistently strong momentum of Ibrance and Eliquis globally and growth of Lyrica and Xeljanz primarily in the U.S.
While Ibrance revenues rose 66% to $853 million in the quarter, Xeljanz rose 55% to $336 million. Lyrica sales rose 5% to $1.10 billion. Eliquis alliance revenues and direct sales rose 50% to $605 million.
Revenues from Xtandi, added to Pfizer’s portfolio following the Sep 2016 Medivation acquisition, also propelled U.S. revenues. Xtandi recorded alliance revenues of $141 million in the quarter compared with $131 million in the first quarter.
This was partially offset by continued decline in revenues from Prevnar 13 in U.S. and lower revenues of Enbrel and Viagra.
Enbrel revenues declined 20% to $617 million in key European markets due to biosimilar competition.
Viagra sales declined 15% to $255 million due to lower sales in the U.S. and international markets on reduced demand.
Global Prevnar 13/Prevenar 13 revenues declined 8% to $1.15 billion. Prevnar 13 revenues tanked 16% in the U.S. due to “high initial capture rate” of the eligible adult patient population following its successful 2014 launch. This resulted in a smaller remaining “catch up” opportunity in the second quarter compared with the year-ago quarter. Unfavorable timing of government purchases for the pediatric indication also hurt U.S. sales.
Eucrisa (crisaborole) topical ointment for the treatment of atopic dermatitis (eczema), which was bought as part of the Jun 2016 Anacor acquisition, was launched in the U.S. in first quarter of 2017. The ointment recorded sales of $9 million in the second quarter.
While Consumer Healthcare revenues rose 1% to $846 million, Global Oncology revenues surged 44% to $1.59 billion driven by Ibrance. Global Vaccine revenues declined 7% to $1.27 billion. While Internal Medicine rose 10% to $2.41 billion, the Inflammation & Immunology franchise declined 1% to $992 million. Additionally, the portfolio of Rare Disease declined 8% to $562 million.
Pfizer EH segment sales recorded a decline of 14% (down 12% operationally) to $5.23 billion. Excluding HIS revenues, EH sales declined 7%.
EH revenues were hurt by the loss of exclusivity and associated generic competition for products like Pristiq (generic versions launched in the U.S. in Mar 2017), Vfend, Zyvox, Celebrex, Lyrica; lower revenues from legacy Hospira products and divesture of HIS. However, in the EH business, biosimilars and emerging markets did well in the quarter.
While Inflectra recorded sales of $23 million in the U.S. and $94 million globally, all other biosimilars brought in sales of $27 million (down 18%) from outside the U.S. markets. Emerging markets revenues grew 5% operationally.
At the call, the company said that Inflectra penetration in the U.S. has been slower than expected as it is experiencing access challenges among national commercial payers.
Adjusted selling, informational and administrative (SI&A) expenses were flat (operationally) in the quarter at $3.39 billion. Adjusted R&D expenses rose 2% to $1.77 billion.
While Pfizer raised the lower end of its adjusted earnings guidance, it retained the revenue expectations for the year. Revenues are expected in the range of $52 billion to $54 billion.
Adjusted earnings per share are expected in the range of $2.54 - $2.60 compared with $2.50–$2.60 expected previously. Higher than previously anticipated royalty income from certain products and lower interest cost led to the increase in the lower end of the profit outlook.
At the mid-point, revenues are expected to be slightly above 2016 level, while adjusted EPS is expected to increase 7% (previously 6%).
Research and development expenses are still expected in the range of $7.5–$8.0 billion, while SI&A spending is projected in the range of $13.7–$14.7 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to two lower.
At this time, the stock has an average Growth Score of C, however its Momentum is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second 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.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for value and to a lesser degree growth.
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.