Pfizer Q3 Earnings Review: Performance On Expected Lines, Future Outlook Is Stable

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Pfizer Inc. (NYSE: PFE) recently reported its Q3’16 earnings and posted operational revenue growth of 3% (excluding legacy Hospira) which was on expected lines. For the next quarter, we believe Pfizer will maintain low single digit growth as the Immuno-Oncology offering led by Ibrance and Sutent will offset the decline in the revenue of a number of major products on account of loss of exclusivity. Pfizer has strong and diverse product pipeline and is also building its biosimilar portfolio. We also like Pfizer’s approach of utilizing cash. While it actively carries out acquisition, it also rewards its shareholders.

Our price estimate of $38 for Pfizer under update

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What Happened In Q3?

The table below compares Pfizer’s Q3’16 performance with previous periods:

pf1

The decline in gross margin on year-over-year basis is because of currency effects which negatively impacted revenue while increasing cost of sales.

Why We Are Upbeat About Pfizer’s Future?

Pfizer has total of 94 products in the pipeline, of which 33 in are in Phase 1 and eight are out of clinicla trials and in the registration phase with the FDA. These products are spread out across different therapeutic areas. Further, eight of these products are biosimilars. The company has strong focus on oncology and Ibrance is turning out to be an important growth driver. We expect the drug to generate nearly $4 billion in revenue by 2020.

Further, Pfizer has very stable corporate strategy. Rcently, management decided against splitting the company into two – innovative health and essential health. It does pursue acquisition for growth – Pfizer carried out acquisitions worth about $40 billion in last one year. It also has a good history of rewarding its investors through dividends. In the last 9-months it returned about $10.5 billion cash in dividend and share buy-backs. Its dividend yield at current share price is about 3.87% which is higher than some of its competitors such as J&J and Merck.

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