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Pfizer (PFE) to Report Q4 Earnings: What's in the Cards?

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Pfizer, Inc. (PFE - Free Report) will report fourth-quarter and full-year 2018 results on Jan 29, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 2.63%.

The pharma giant has a strong record of earnings surprises. The company’s earnings surpassed expectations in each of the last four quarters, leading to an average positive surprise of 6.35%.

Pfizer Inc. Price and EPS Surprise

 

Pfizer Inc. Price and EPS Surprise | Pfizer Inc. Quote

Pfizer’s shares have risen 14.2% this year so far against a decline of 1% for the industry.

 

Factors at Play

Higher sales of Pfizer’s key brands, Ibrance, Eliquis and Prevnar, are makingup for loss of exclusivity of some products, lower sales of legacy Established Products in developed markets and continued supply shortages in legacy Hospira products.

In the Innovative Health (IH) segment, products like Xeljanz (rheumatoid arthritis), Ibrance (breast cancer), Prevnar 13 (pneumonia vaccine) and Eliquis (blood thinner) should contribute to the top line meaningfully. In Essential Health (EH), biosimilars and emerging markets are expected to support sales.

Ibrance sales declined in the United States in the third quarter due to increased rebates and rising competition in the CDK inhibitor category. The category now includes Eli Lilly’s Verzenio and Novartis’ Kisqali. It is to be seen if the sales trend improves in the fourth quarter.

Xeljanz was approved for new indications — ulcerative colitis in both Europe and United States and active psoriatic arthritis in Europe in 2018 — which boosted sales of the drug in the third quarter. The trend is expected to continue.

The Zacks Consensus Estimate for sales of Ibrance (worldwide) and Xeljanz is $1.14 billion and $537 million, respectively.

Blockbuster drug Enbrel sales will continue to decline in the quarter due to biosimilar competition in key European markets. The Zacks Consensus Estimate for sales of Enbrel and Prevnar is $507 million and $1.49 billion, respectively.

Xtandi was approved for non-metastatic prostate cancer patient population in the United States in July and in the EU in October and is expected to add to alliance revenues from the drug. The Zacks Consensus Estimate for alliance revenues from Xtandi is $205 million.

However, the loss of exclusivity and associated generic competition for some products primarily Pristiq and Viagra in the United States and Lyrica in Europe, and lower revenues from sterile injectables portfolio due to continued legacy Hospira product shortages in the United States is expected to dampen top-line growth. Also, lower sales of legacy Established Products in developed markets driven by industry-wide pricing challenges will hurt EH segment sales.

The bottom line is expected to be driven by cost savings and share buybacks.

In 2018, Pfizer made significant progress with its biosimilar portfolio. In the United States, a biosimilar of Amgen’s (AMGN - Free Report) Neupogen was launched in late September 2018 while a biosimilar version of Epogen was approved in May and launched in November 2018. These should add to the company’s top line in the fourth quarter. The Zacks Consensus Estimate for sales of biosimilars in the fourth quarter is $240 million.

In oncology, Pfizer gained FDA approval for four innovative medicines in third/fourth of 2018, which can boost its oncology sales. These include Daurismo (glasdegib) for previously untreated AML, Lorbrena (lorlatinib) for second line non-small-cell lung cancer, Vizimpro (dacomitinib) for advanced NSCLC with EGFR activating mutations and Talzenna (talazoparib), an orally-available PARP inhibitor for advanced breast cancer. Investors will be keen to know the sales plan for new cancer medicines on the conference call.

Last month, the company resolved a long pending issue by announcing an agreement to merge its consumer healthcare unit with Glaxo’s unit. The new joint venture (JV) will be the world’s largest consumer healthcare business. While Glaxo will own a controlling stake of 68% in the JV, Pfizer will own 32%. The separation of its consumer health unit will allow Pfizer to better concentrate on its core pharmaceutical unit in 2019. Investors are expected to question Pfizer on this development.

What Our Model Indicates

Our proven model does not conclusively show that Pfizer is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Earnings ESP: Its Earnings ESP is 0.00% as the Most Accurate Estimate as well as the Zacks Consensus Estimate is pegged at 63 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Pfizer has a Zacks Rank #4 (Sell). We caution against Zacks Rank #4 or 5 (Strong Sell) stocks going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some large drug stocks that have the right combination of elements to beat on earnings this time around:

Allergan plc. (AGN - Free Report) has an Earnings ESP of +3.45% and a Zacks Rank #3. The company is slated to release results on Jan 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

AbbVie, Inc. (ABBV - Free Report) has an Earnings ESP of +1.07% and a Zacks Rank #3. The company is slated to release results on Jan 25.

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