Pfizer (PFE) reported 24Q2 revenues of $13.3 billion, up 4% from 23Q2, but 4.5% below my estimate. The shortfall from projections was due mostly to lower than expected sales of Comirnaty, Prevnar, Paxlovid and Abrysvo. Pfizer’s GAAP EPS was $0.01, down from $0.41 in 23Q2 and below my estimate of $0.14. The decline in GAAP earnings was caused by a $1.3 billion charge related to the company’s Manufacturing Optimization Program and a $230 million IPRD asset impairment charge associated with discontinuing a product development program. Non-GAAP EPS of $0.60 was below last year’s $0.67, but better than my estimate of $0.48.
Management raised its 2024 revenue guidance by $1.0 billion to $59.5-$62.5 billion, reduced its expected effective tax rate on adjusted income from 15.0% to 13.0% and raised its adjusted diluted EPS outlook by $0.30 to $2.45-$2.65. The increase in guidance is mostly as a result of higher expected adjusted gross margin, which increased by 460 bp to 79.4% in 24H1, mostly as a result of a change in sales mix (i.e. lower sales of low margin COVID-19 medicines).
Based upon 24Q2 results and the revised guidance, I have lowered my 2024 GAAP EPS estimate from $1.35 to $1.16; but raised my 2024 non-GAAP EPS estimate from $2.46 to $2.67. My revised 2024 non-GAAP EPS estimate is above the high end of the guidance range. Yet, all of the income statement line items in my projections are consistent with management’s guidance. The only exception, for which management does not provide formal guidance, is gross margin. Still, my 2024 gross margin assumptions are below those hinted at by management in the conference call Q&A. If I were to follow those indications, my 2024 non-GAAP EPS estimate would be higher.
For 2025, I now project revenues of $63.5 billion, up 4.0% from projected 2024 revenues; GAAP EPS of $1.62 and non-GAAP EPS of $2.75. The increase is due mostly to lower SI&A expense as a result of the company’s cost savings initiatives and revenue growth. I project that gross margin will be 30 bp lower.
Since my last report, Pfizer’s stock has earned 8.5%, better than the NYSE ARCA Pharmaceutical Index’s 3.5% and the S&P 500’s 0.6% loss. On July 30, the stock peaked at $31.54, above my previous $30 price target, but it has since fallen back to $28.85. With the revised projections, I am raising my target from $30 to $33. The new price target equates to a one-year forward multiple of 20.5 times projected 2025 GAAP EPS of $1.62 (or 12 times projected non-GAAP EPS of $2.72). The non-GAAP multiple of 12 is above the current 10.8, so my target assumes the stock’s discount vs. peers will fade as Pfizer demonstrates progress on its objectives. The new price target represents a potential total return of 20%, including the 5.8% dividend yield. Accordingly, I am maintaining my rating of “1” (Buy).
This is a summary of my recent update report on Pfizer, Inc. (PFE). To obtain a copy of the report, please reach out to me using the contact information provided below.
August 20, 2024 (Report published on August 13, 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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