Pfizer (PFE) reported 24Q1 revenues of $14.9 billion, down 19% from 23Q1, but 7% above my estimate. Its GAAP EPS was $0.55 and non-GAAP EPS $0.82, down from $0.97 and $1.23 last year, but well ahead of my estimates of $0.22 and $0.49, respectively. The consensus non-GAAP estimate was $0.51.
The decline in 24Q1’s revenues was due entirely to lower sales of Comirnaty and Paxlovid, the COVID-19 medicines, whose sales have been transitioning from Federal emergency use authorization to the commercial market. Excluding those two medicines, Pfizer’s revenues increased 12.1% to $12.5 billion, mostly from the acquisition of Seagen and worldwide growth in its Vyndaqel, Eliquis, Prevnar, Xtandi and ODT/Vydura franchises, partially offset by declines in Ibrance, Xeljanz and Inlyta.
Gross margin increased 370 bp from 73.6% to 77.3%, mostly from the decline in lower margin Comirnaty and Paxlovid sales. Selling, informational and administrative expenses rose slightly, despite the drop in revenues, as higher marketing and promotional expenses for recently acquired and launched products more than offset a decrease in similar expenses for Comirnaty and Paxlovid. R&D expense was flat, as the benefit from Pfizer’s cost realignment program and lower spending on vaccines was partially offset by the inclusion of Seagen’s R&D expenses.
With the stronger-than-expected sales from in-line and acquired products combined with further progress on reducing costs, management raised its full year non-GAAP EPS guidance by $0.10 to $2.15-$2.35. The increase in guidance seems conservative because 24Q1 non-GAAP earnings exceeded estimates by more than $0.30. As a result, the current mean analyst estimate is now $2.34 ($2.15-$2.63), at the high end of management’s guidance. Accordingly, I have increased my full-year 2024 estimate from $2.23 (which was at the high end of management’s previous guidance) to $2.46. For 2025, I now project GAAP EPS of $1.43 and non-GAAP EPS of $2.51.
After I initiated coverage on April 6, Pfizer’s stock outperformed the broader market and peers, coming within a whisker of my price target of $30 on June 4. Since then however, the stock has been in a downtrend, underperforming both the market and peers. From a technical point of view, the chart over the past six weeks looks like a double-top formation, raising the risk of further downside.
Yet, even with the increased volatility, the stock is up 3.7% since April 5, only modestly below the S&P 500’s 4.4% advance and the NYSE ARCA Pharmaceutical Index’s 5.5% advance.
Despite raising my earnings estimates, I am maintaining my price target at $30.00, due to the stock’s recent price action, its increased stock price volatility and the conservatism of management’s raised guidance. The PT now represents an assumed one-year forward multiple of 12.0 times, down from 12.5 times in my previous report. That is still well below the peer group average of 14 times. The price target offers a potential total return of 14.5% from the current quote, including the 6.1% dividend yield. I am therefore maintaining my buy rating on the stock. If the cadence of earnings reports and clinical trials data begins to alleviate investor concerns about the sustainability of its earnings, Pfizer’s forward valuation multiples could go higher.
This is a summary of my recent update report on Pfizer, Inc. (PFE). To obtain a copy of the full report, please reach out to me using the contact information provided below.
June 20, 2024 (Report published on June 17, 2024.)
Stephen P. Percoco
Lark Research
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© 2015-2024 by Stephen P. Percoco, Lark Research. All rights reserved.
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