Pfizer (PFE) reported 24Q3 revenues of $17.7 billion, up 33.8% from 23Q3, and 13% above my estimate. The key driver of the revenue beat came from Paxlovid, which posted sales of $2.7 billion, beating my estimate of $400 million. GAAP EPS was $0.78, reversing last year’s loss of $0.42 and trouncing my estimate of $0.25. Non-GAAP EPS of $1.06 compared with last year’s loss of $0.42, and was well above my estimate of $0.61.
Management raised its 2024 revenue guidance for the second consecutive quarter by $1.5 billion to $61.0-$64.0 billion (primarily due to its COVID medicines) and reaffirmed its expectations for adjusted SI&A and R&D expenses and the effective tax rate. It raised its adjusted (non-GAAP) diluted EPS outlook (for the third time this year) by $0.30 to $2.75-$2.95. It also warned that $0.30 of adjusted EPS came from non-recurring items, including a $1.2 billion one-time true up and stockpile build of PAXLOVID by the U.S. government, the removal of equity income earned on its stake in Haleon (which is now below the 20% threshold) and the favorable tax rate impact from Pillar 2 timing and audit settlements.
Based upon 24Q3 results and the updated guidance, I have raised my 2024 GAAP EPS estimate from $1.16 to $1.59; and non-GAAP estimate from $2.67 to $3.00 (or by less than the 24Q3 EPS beat). My 2024 non-GAAP estimate remains above the high end of the guidance range, even though my key assumptions are in line with guidance.
For 2025, I now project revenues of $65.5 billion, up 3.9% from estimated 2024 revenues; GAAP EPS of $2.02 and non-GAAP EPS of $3.05. My projections incorporate fully the $0.30 of non-recurring items listed above. I anticipate that this headwind will be more than offset by the now higher expected revenues from the COVID medicines as well as net growth in the rest of the portfolio combined with the benefits of the company’s cost savings initiatives.
Since my last report (8/16), Pfizer’s stock has declined 5.2%, better than the NYSE ARCA Pharmaceutical Index’s 9.4% decline but behind the S&P 500’s 9.1% advance. Last month, the activist Starboard Value initiated a campaign to call management to account for the stock’s lagging performance. It seems unfair, in my view, for Starboard to press its case right now, since Pfizer needs more time to demonstrate the benefits of its recent strategic moves, including its December 2023 acquisition of Seagen.
Based upon the stock’s recent performance, I am maintaining my $33 price target which equates to one-year forward multiples of 16.3 times projected 2025 GAAP EPS of $2.02 and 10.8 times projected non-GAAP EPS of $3.05. The non-GAAP multiple of 10.8 is well below the peer group average of 14.8. The price target represents a potential total return of 27%, including the stock’s 6.1% dividend yield. Accordingly, I am reiterating 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.
November 18, 2024 (Report published on November 6, 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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