Global pharmaceutical major Pfizer Inc. (PFE) surpassed Wall Street’s EPS and revenue estimates in the third quarter. The company’s revenue beat the consensus estimate by 7.3%, while its EPS was 27% higher than the estimate. Although revenues fell 2% from the prior-year period, they rose 2% operationally, excluding contributions from Paxlovid and Comirnaty.
PFE CFO and Executive VP David Denton said, “Third-quarter results demonstrated commercial strength across many areas of our business, but was somewhat obscured by the incredibly strong performance in the prior-year. We saw strong operational performance this quarter from key brands such as Paxlovid and Eliquis, particularly in the U.S., as well as the continued impressive launch of Prevnar 20 for adults in the U.S.”
The company raised its revenue guidance for fiscal 2022 from $98-$102 billion to $99.50- $102 billion. It also increased its adjusted EPS outlook from the previous guidance of $6.30-$6.45 to $6.40-$6.50. PFE raised its fiscal 2022 revenue guidance for Comirnaty by $2 billion to ~$34 billion and also reaffirmed the revenue guidance for Paxlovid of ~$22 billion.
PFE pays a $1.64 per share dividend annually, translating to a 3.64% yield. The company’s dividend has grown at a 5.2% CAGR over the past three years. Over the last five years, PFE’s dividend payouts have grown at a 5.5% CAGR.
Its four-year average dividend yield is 3.63%. It is expected to pay a quarterly dividend of $0.41 per share on March 3, 2023. The first quarter dividend will mark the 337th consecutive quarterly dividend paid by PFE.
The stock has declined 15.4% in price over the past six months and 16.5% over the past year to close the last trading session at $44.25. However, Wall Street analysts expect the stock to hit $51.50 in the near term, indicating a potential upside of 16.4%.
Here’s what could influence PFE’s performance in the upcoming months:
Positive Recent Developments
On December 29, 2022, PFE announced positive top-line results from the Phase 3 BENEGENE-2 study evaluating fidanacogene elaparvovec, an investigational gene therapy to treat adults with moderately severe to severe hemophilia B.
In addition, on December 8, 2022, PFE and BioNTech SE (BNTX) announced that it had achieved the U.S. Food and Drug Administration’s emergency use authorization for their Omicron BA.4/BA.5-adapted bivalent COVID-19 vaccine. It marks a significant achievement for the companies.
Robust Financials
PFE’s non-GAAP net income attributable to PFE’s common shareholders increased 39.7% year-over-year to $10.17 billion for the third quarter ended September 30, 2022. Its non-GAAP EPS came in at $1.78, representing an increase of 40.2% from the year-ago period.
Its total revenues for nine months ended September 30, 2022, increased 32.4% year-over-year to $76.04 billion. Its non-GAAP net income rose 67.1% year-over-year to $31.16 billion. In addition, its non-GAAP EPS came in at $5.44, representing an increase of 65.9% year-over-year.
Mixed Analyst Estimates
PFE’s revenue and EPS for fiscal 2022 are expected to increase 23.6% and 46.7% year-over-year to $100.51 billion and $6.48, respectively. However, its revenue and EPS for fiscal 2023 are expected to decline 26% and 30.8% year-over-year to $74.41 billion and $4.49, respectively. It surpassed Street EPS estimates in each of the trailing four quarters.
High Profitability
In terms of trailing-12-month gross profit margin, PFE’s 66.17% is 19.3% higher than the 55.48% industry average. Likewise, its 44.81% trailing-12-month EBITDA margin is significantly higher than the industry average of 3.73%. Furthermore, the stock’s 0.53x trailing-12-month asset turnover ratio is 56% higher than the industry average of 0.34x.
Discounted Valuation
In terms of forward non-GAAP P/E, PFE’s 6.82x is 65.8% lower than the 19.93x industry average. Its forward EV/EBITDA of 5.73x is 58.2% lower than the 13.70x industry average. Also, the stock's 2.52x forward P/S is 46.3% lower than the 4.69x 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 high profitability.
PFE is ranked #8 out of 169 stocks in the Medical - Pharmaceuticals industry. Click here to access PFE’s ratings for Growth, Momentum, Stability, and Sentiment.
Bottom Line
PFE’s growth prospects look bright as the company is investing billions in its research and development (R&D) projects and is also making acquisitions to drive revenues from various new drugs and therapies. Amid the macroeconomic uncertainties, investors could look to add PFE due to its high-dividend yield.
Given its robust financials, consistent dividend payments, discounted valuation, and high 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. Check out these other stocks within the Medical – Pharmaceuticals industry with an A (Strong Buy) rating: Novo Nordisk A/S (NVO), Astellas Pharma Inc. (ALPMY), and Neurocrine Biosciences, Inc. (NBIX).
PFE shares were unchanged in premarket trading Friday. Year-to-date, PFE has declined -12.85%, versus a 5.84% 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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