Will Pfizer Stock Post A Downbeat Q2?

Pfizer (NYSE: PFE) is scheduled to report its Q2 2024 results on Tuesday, July 30. We expect the company to post revenue of $12.95 billion and earnings of $0.44 on a per share and adjusted basis, lower than the consensus estimates. The company is likely to see higher sales, led by an uptick in Eliquis and Prevnar sales. However, we think that the top-line may fall short of analyst expectations, amid increased competition. Not only do we expect Pfizer to post a downbeat Q2, we think its stock is appropriately priced at its current levels of around $30. Our interactive dashboard analysis of Pfizer’s Earnings Preview has more details on the company’s revenues and earnings for the quarter. So, what are some of the trends that are likely to drive Pfizer’s results?

Firstly, let us look at Pfizer’s stock performance in recent years. PFE stock has faced a decline of 15% from levels of $35 in early January 2021 to around $30 now, vs. an increase of about 45% for the S&P 500 over this roughly three-year period. However, the decrease in PFE stock has been far from consistent. Returns for the stock were 60% in 2021, -13% in 2022, and -44% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that PFE underperformed the S&P in 2023.

In fact, consistently beating the S&P 500 — in good times and bad — has been difficult over recent years for individual stocks; for heavyweights in the Health Care sector including UNH and JNJ, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could PFE face a similar situation as it did in 2023 and underperform the S&P over the next 12 months — or will it see a recovery? From a valuation perspective, Pfizer looks like it is fully priced. We estimate Pfizer’s Valuation to be $29 per share, aligning with its current market price. PFE stock currently trades at 13x forward expected earnings of $2.25 per share in 2024, lower than its 15x average over the last five years. However, the valuation multiple has fluctuated in a wide range in recent years due to a strong earnings growth during the Covid-19 pandemic phase, driven by its vaccine and antiviral therapy. A valuation multiple slightly lower than its historical average seems justified, in our view.

Looking at the previous quarter, Pfizer’s revenue of $14.9 billion in Q1 was down 19% y-o-y, primarily due to lower sales of its Covid-19 products. The sales growth was 11%, excluding the Covid-19 products. A strong uptick in Vyndaqel and Abrysvo aided the overall sales growth. Eliquis sales were up 10% and Prevnar family saw a 7% uptick in revenue. Pfizer’s adjusted net margin plunged over 670 bps to 31.4% partly due to higher R&D expenses. Lower revenues and margin contraction resulted in earnings of $0.82 on a per-share and adjusted basis, compared to $1.23 in the prior-year quarter.

Coming to the latest quarter, Vyndaqel and Abrysvo will likely gain market share. The Prevnar and Eliquis sales should also trend higher. The company’s Covid-19 product sales will likely be favorably comparable to the prior-year quarter. Pfizer expects its 2024 revenue to fall between $58.5 billion and $61.5 billion, and its adjusted earnings to be in the range of $2.15 to $2.35 per share. Overall, Pfizer is expected to report a y-o-y sales growth, but it may fall short of the street estimates.

While PFE stock looks like it is fully valued, it is helpful to see how Pfizer’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 7/25/2024
[2] Cumulative total returns since the end of 2016

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