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Pfizer (PFE) to Report Q1 Earnings: Will It Beat Estimates?

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We expect Pfizer, Inc. (PFE - Free Report) to beat estimates when it reports first-quarter 2019 results on Apr 30, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 1.59%.

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 4.07%.

Pfizer Inc. Price and EPS Surprise

 

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

Pfizer’s shares have declined 9.7% this year so far compared with a decline of 3.7% for the industry.

 

Factors at Play

Higher sales of Pfizer’s key brands, Ibrance, Chantix and Xeljanz and alliance revenues from Xtandi and Eliquis in the Innovative Health (IH) segmentshould make up for lower sales in the Essential Health (EH) segment in the first quarter of 2019.

However, in the last two reported quarters, rising competition in the CDK inhibitor category and increased rebates hurt U.S. sales of Ibrance. We expect the competitive pressure to continue to hurt sales in the first quarter. For Xeljanz, contributions from the drug's recent expansion into psoriatic arthritis and ulcerative colitis in the United States should support higher sales through 2019.

Xtandi was approved for non-metastatic prostate cancer patient population in the United States and EU in 2018, which may add to alliance revenues from the drug in the first quarter.

The Zacks Consensus Estimate for sales of Ibrance (worldwide), Xeljanz and Chantix is $1.1 billion, $510 million and $263 million, respectively.

Blockbuster drug Enbrel sales are expected to decline in the quarter due to biosimilar competition in key European markets. Prevnar 13 vaccine revenues declined in the United States in the fourth quarter. It remains to be seen if sales improve in the first quarter. The Zacks Consensus Estimate for sales of Enbrel and Prevnar is $379 million and $1.36 billion, respectively.

In oncology, Pfizer gained FDA approval for four innovative medicines – Daurismo, Lorbrena, Vizimpro and Talzenna – in the last four months of 2018. These drugs may boost its oncology sales in the first quarter. The Zacks Consensus Estimate for total oncology sales is $1.86 billion.

EH revenues were hurt by the loss of exclusivity and associated generic competition for 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. Also, lower sales of legacy Established Products in developed markets driven by industry-wide pricing challenges hurt EH segment sales.

We do not expect any improvement in this segment’s sales in the first quarter. However, in the EH business, biosimilars and emerging markets should continue to do well.

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 biosimilar sales in the to-be reported quarter.

Importantly, beginning the first quarter of 2019, Pfizer will report under three new business units — Pfizer Biopharmaceuticals Group (previous IH unit except Consumer Healthcare), Upjohn (previous EH unit) and Consumer Healthcare.

We remind investors that Pfizer’s Consumer Healthcare unit will merge with Glaxo’s unit to form a new joint venture (JV). Pfizer will own a stake of 32% in the JV. Pfizer had been exploring strategic options for its Consumer Healthcare unit since October 2017. The transaction is expected to close in the second half of 2019.

What Our Model Indicates

Our proven model shows that Pfizer is likely to beat estimates this quarter because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely positive surprise.

Earnings ESP: Earnings ESP is +0.65%. The Zacks Consensus Estimate is pegged at 77 cents per share. 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 #3. The combination of Pfizer’s Zacks Rank #3 and positive ESP makes us confident of an earnings beat in the upcoming release.

Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some other 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 +1.05% and a Zacks Rank #3. The company is slated to release results on May 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

AbbVie, Inc. (ABBV - Free Report) has an Earnings ESP of +0.76% and a Zacks Rank #3. The company is slated to release results on Apr 25.

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