A month has gone by since the last earnings report for Pfizer (PFE Quick QuotePFE - Free Report) . Shares have added about 3.1% 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 its most recent earnings report in order to get a better handle on the important drivers.

Pfizer Beats on Q2 Earnings & Sales, Ups Profit View

Pfizer reported second-quarter 2018 adjusted earnings per share of 81 cents, which beat the Zacks Consensus Estimate of 75 cents by 8.0%. Earnings rose 21% year over year driven by higher revenues, higher non-operating income and lower tax rates and share count. Foreign exchange favorably impacted adjusted EPS by 2 cents.

Pfizer recorded revenues of $13.47 billion, which also beat the Zacks Consensus Estimate of $13.26 billion. Revenues rose 4% from the year-ago quarter on a reported basis. On an operational basis, excluding the impact of currency, revenues rose 2% year over year.

Higher sales of key brands, Ibrance, Eliquis and Xeljanz, made up for loss of exclusivity for some products, lower sales of legacy Established Products in developed markets and continued supply shortages in legacy Hospira products.

International revenues rose 11% (up 5% an operational basis) to $7.24 billion. U.S. revenues declined 2% to $6.23 billion.

Revenues from the Consumer Healthcare segment, which Pfizer is considering selling, rose 2% to $886 million. Global Oncology revenues increased 12% to $1.82 billion. Global Vaccine revenues rose 8% to $1.40 billion. Internal Medicine rose 3% to $2.53 billion. The Inflammation & Immunology franchise rose 4% to $1.06 billion. Additionally, the portfolio of Rare Disease declined 3% to $571 million.

Segment Discussion

Pfizer’s reporting segments are Pfizer Innovative Health (IH) and Pfizer Essential Health (EH).

Pfizer IH sales grew 8% on a reported basis (up 5% an operational basis) from the year-ago period to $8.27 billion as higher sales of Ibrance, Eliquis, Xeljanz, Xtandi and Prevnar (primarily in emerging markets and the U.S.) offset lower sales of Enbrel.

With Viagra losing exclusivity in December 2017, its U.S. and Canada sales are now reported in the EH segment against IH previously. This hurt sales of the IH segment while adding sales in the EH segment.

Ibrance revenues rose 19% year over year to $1.03 billion driven by volume growth in ex-U.S. markets. On the call, the company said that Ibrance holds a leadership position in first-line hormone receptive positive HER2 negative metastatic breast cancer market.

In the CDK inhibitors category, which now includes two competitors - Eli Lilly’s Verzenio and Novartis’ Kisqali – Ibrance's total prescription share is 91%. On the call, the company said that the overall CDK market is decelerating

Xeljanz sales rose 37% to $463 million. Lyrica sales rose 2% to $1.13 billion. Eliquis alliance revenues and direct sales rose 42% to $889 million. Chantix sales rose 11% to $277 million in the quarter.

Xtandi recorded alliance revenues of $171 million in the quarter compared with $159 million in the previous quarter. In July, Xtandi’s U.S. label was expanded to include men with non-metastatic castration-resistant prostate cancer, which can drive sales higher in future quarters.

Global Prevnar 13/Prevenar 13 revenues rose 7% to $1.25 billion. Prevnar 13 revenues rose 6% in the United States due to higher government purchases than last year for the pediatric indication, which offset continued decline in revenues for the adult indication. Prevenar 13 revenues rose 8% in international markets due to favorable timing of government purchases for the pediatric indication in some emerging markets and the launch of the pediatric indication in China.

Enbrel revenues declined 15% to $551 million in key European markets due to biosimilar competition.

Eucrisa (crisaborole) topical ointment, launched in the United States in 2017, recorded sales of $39 million in the second quarter compared with $26 million in the previous quarter.

Pfizer EH segment sales declined 1% (down 4% operationally) to $5.19 billion.

EH revenues were hurt by the loss of exclusivity and associated generic competition for products, primarily Lyrica in Europe and lower revenues from sterile injectables portfolio due to continued legacy Hospira product shortages in the United States. Also, lower sales of legacy Established Products in developed markets hurt EH segment sales. Pfizer is facing supply shortages for sterile injectable products from the legacy Hospira portfolio mainly due to capacity constraints and technical issues.

Total Viagra sales declined 48% to $185 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 44% operationally mainly driven by Inflectra in developed Europe and in certain U.S. channels while emerging markets revenues grew 10% operationally led by China.

While Inflectra recorded sales of $63 million in the United States and $158 million globally, other biosimilars brought in sales of $29 million (down 4%) from outside the U.S. markets.

Other Details

Adjusted selling, informational and administrative (SI&A) expenses rose 1% (operationally) in the quarter to $3.51 billion. Adjusted R&D expenses were flat at $1.79 billion.

In the first half of 2018, 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. Pfizer’s remaining share repurchase authorization was $10.3 billion as of Jul 31.

2018 Guidance

While Pfizer raised its earnings expectations for 2018, it slightly lowered the revenue guidance due to less favorable currency impact owing to a strengthening dollar.

Revenues are expected in the range of $53.0 billion to $55.0 billion compared with $53.5 billion to $55.5 billion previously. Adjusted earnings per share are expected in the range of $2.95 - $3.05 compared with $2.90 - $3.00 expected previously. At the mid-point, adjusted EPS is expected to increase 13% (previously 11%) while revenues are still expected to increase 4%.

Research and development expenses are likely to be in the range of $7.7–$8.1 billion versus $7.4–$7.9 billion previously while SI&A spending is still projected in the range of $14.0–$15.0 billion. The R&D expense guidance was raised due to expectation of higher spend in the second half related to late-stage pipeline programs.

Adjusted tax rate is expected to be approximately 16% in 2018 versus 17% previously.

The guidance assumes no generic competition for Lyrica in the United States until June 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Pfizer has a subpar Growth Score of D, however its Momentum Score 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

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