What Trends Will Drive Pfizer’s Q3?

Pfizer (NYSE: PFE) is scheduled to report its Q3 2024 results on Tuesday, October 29. We expect the company to post revenue of $15.1 billion and earnings of $0.63 on a per share and adjusted basis, slightly above the consensus estimates of $14.9 billion and $0.62, respectively. The company is likely to see higher sales, led by an uptick in sales of some of its new drugs, including Vyndaqel. Our interactive dashboard analysis of Pfizer’s FY 2024Q3 Earnings Preview has more details on the company’s revenues and earnings for the quarter. Separately, in the healthcare sector, worth reading: Intuitive Surgical’s Road to 10x.

What Trends Will Drive Pfizer’s Results?

We think Pfizer’s top line will see growth in the low teens, driven by market share gains for Vyndaqel and Abrysvo. Vyndaqel – used to treat transthyretin amyloid cardiomyopathy (ATTR-CM) – has seen its sales surge 68% y-o-y to $2.5 billion for the six-month period ending June 2024. This strong growth is expected to continue in the near term. Pfizer should also benefit from continued growth for its anticoagulant – Eliquis, and the contribution from Seagen.

The company expects its 2024 revenue to be in the range of $59.5 billion and $62.5 billion, reflecting a 4.3% y-o-y growth at the mid-point of its range. This would mark the year of rebound for Pfizer, after it saw its sales plunge 42% y-o-y to $58.5 billion in 2023, versus $100.3 billion in 2022. The rise in 2021 and 2022 sales for Pfizer was driven by the sales of is Covid-19 products.

Pfizer is working on a cost-cutting initiative, targeting $4 billion in savings by the end of this year. This will help the company expand its net margin, and aid its bottom line. It expects the earnings to be in the range of $2.45 and $2.65 per share, reflecting a 39% y-o-y rise at the mid-point of the range.

How Did Pfizer Fare In Q2?

Looking at the previous quarter, Pfizer’s revenue of $13.3 billion in Q2 was up 2% y-o-y, primarily due to lower sales of its Covid-19 products, which offset most of the gains for its oncology and specialty care sales. The sales growth was 14%, excluding the Covid-19 products. A strong uptick in Vyndaqel and Abrysvo aided the overall sales growth. Eliquis sales were up 8% and Vyndaqel family saw a 71% uptick in revenue. Pfizer’s adjusted net margin plunged nearly 400 bps to 25.6% partly due to higher SG&A and restructuring expenses. Higher revenues and margin contraction resulted in earnings of $0.60 on a per-share and adjusted basis, compared to $0.67 in the prior-year quarter.

What Does This Mean For PFE Stock?

We think PFE stock may see higher levels post Q3 announcement on a revenue and earnings beat. If the company were to raise its full-year outlook, it will likely bode well with the investors. We estimate Pfizer’s Valuation to be $34 per share, reflecting over 15% upside from its current levels of around $29. Our forecast is based on 13x expected earnings of $2.62 per share in 2024, lower than the stock’s average P/E ratio of 15x over the last five years. A valuation multiple slightly lower than its historical average seems justified, in our view, given the decline in sales in the recent past.

PFE stock has underperformed the broader markets, with 3% gains this year, vis-à-vis a 22% rise for the S&P500 index. Even if we look at a slightly longer period, the performance of PFE stock with respect to the index over the last three-year period has been quite volatile. Returns for the stock were 67% in 2021, -10% in 2022, and -41% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it 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.

While PFE stock looks like it has some room for growth, 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 10/28/2024
[2] Cumulative total returns since the end of 2016

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