The consumer price index (CPI) rose 8.3% year-over-year and 0.1% over the prior month in August. The higher-than-expected inflation numbers will likely push the Fed to continue with its aggressive interest rate hikes.
Investors fear that the aggressive interest rate hikes will push the economy into a recession. The pharmaceutical industry has been known to do well amid the recession due to the highly inelastic demand for pharma products. People cannot cut back on medical expenditures, irrespective of the economic cycles.
Pfizer Inc. (PFE) is a research-based, global biopharmaceutical company engaged in the discovery, development, manufacture, marketing, sale, and distribution of biopharmaceutical products worldwide.
PFE surpassed EPS and revenue estimates in the last reported quarter. The company’s revenue beat the consensus estimate by 5.9%, while its EPS was 14.8% higher than Street estimate.
In July, PFE revised its guidance for fiscal 2022. The company now expects its adjusted EPS to come in the range of $6.30-$6.45, up from the $6.25-$6.45 guided before. Its adjusted EPS is expected to grow between 55% and 59%, compared to the earlier expectation of 54- 59%.
PFE pays a $1.60 per share dividend annually, translating to a 3.47% yield. The company’s dividend has grown at a 5.7% CAGR over the past three years. Over the last five years, PFE’s dividend payouts have grown at a 5.9% CAGR. Its four-year average dividend yield is 3.60%. PFE has paid dividends for 11 consecutive years.
The stock has declined 21.8% in price year-to-date, while it has gained 3.2% over the past year to close the last trading session at $45.94.
Here’s what could influence PFE’s performance in the upcoming months:
Robust Financials
PFE’s revenues increased 46.8% year-over-year to $27.74 billion for the second quarter that ended June 30, 2022. The company’s adjusted income increased 93.5% year-over-year to $11.65 billion. Its adjusted EPS came in at $2.04, representing an increase of 92.5% year-over-year. In addition, its Biopharma revenues increased 48.5% year-over-year to $27.42 billion.
Mixed Analyst Estimates
PFE’s revenue and EPS for fiscal 2022 are expected to increase 25.2% and 46.9% year-over-year to $101.74 billion and $6.49, respectively. However, its revenue and EPS for fiscal 2023 are expected to decline 24% and 21.7% year-over-year to $77.34 billion and $5.08, respectively. It surpassed Street EPS estimates in each of the trailing four quarters.
Higher-than-industry Profitability
In terms of trailing-12-month gross profit margin, PFE’s 62.75% is 15.2% higher than the 54.49% industry average. Likewise, its 42.97% trailing-12-month EBITDA margin is significantly higher than the industry average of 3.86%. Furthermore, the stock’s 38.05% trailing-12-month EBIT margin is significantly higher than the industry average of 0.61%.
Discounted Valuation
In terms of forward non-GAAP P/E, PFE’s 7.11x is 61% lower than the 18.26x industry average. Its trailing-12-month EV/EBITDA of 5.77x is 56.7% lower than the 13.32x industry average. Also, the stock's 2.55x trailing-12-month P/S is 45.4% lower than the 4.67x industry average.
POWR Ratings Show Promise
PFE has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. PFE has an A grade for Value, consistent with its discounted valuation.
It has a B grade for Quality, in sync with its higher-than-industry profitability.
PFE is ranked #8 of 164 stocks in the Medical - Pharmaceuticals industry. Click here to access PFE’s ratings for Growth, Momentum, Stability, and Sentiment.
Bottom Line
Amid the economic uncertainties, investors could look to add PFE due to the highly inelastic demand for its products. The company has raised its guidance for the current year. It also beat its consensus EPS estimates in each of the trailing four quarters.
Given its robust financials, consistent dividend payments, discounted valuation, and higher-than-industry profitability, it could be wise to buy the stock now.
How Does Pfizer Inc. (PFE) Stack Up Against its Peers?
PFE has an overall POWR Rating of A, equating to a Strong Buy rating. You might want to consider investing in the following Medical – Pharmaceuticals stocks with an A (Strong Buy) or B (Buy) rating: Johnson & Johnson (JNJ), Merck & Co., Inc. (MRK), and Zoetis Inc. (ZTS).
PFE shares fell $0.02 (-0.04%) in after-hours trading Friday. Year-to-date, PFE has declined -20.20%, versus a -18.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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