Pfizer (NYSE: PFE) reported its Q3 results earlier this week, with revenues missing but earnings beating the street estimates, and we believe that PFE stock has ample room for growth, as discussed below. The company reported revenue of $13.2 billion and an adjusted loss of $0.17 per share compared to the consensus estimates of $13.3 billion in sales and $0.32 loss per share. In this note, we discuss Pfizer’s stock performance, key takeaways from its recent results, and valuation.
PFE stock has seen a decline of 15% from levels of $35 in early January 2021 to around $30 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. However, the decrease in PFE stock has been far from consistent. Returns for the stock were 60% in 2021, -13% in 2022, and -40% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 11% in 2023 (YTD) – indicating that PFE underperformed the S&P in 2023.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Health Care sector, including LLY, UNH, and JNJ, and even for the megacap stars GOOG, TSLA, and MSFT.
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In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could PFE face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a recovery? From a valuation perspective, PFE stock looks like it has room for growth. We estimate Pfizer’s Valuation to be $36 per share, reflecting an 18% upside from its current levels of $31. Our forecast is based on a 24x P/E multiple for PFE and expected earnings of $1.51 on a per-share and adjusted basis for the full year 2023. The company lowered its earnings outlook in mid-October to be in the range of $1.45 and $1.65 (vs. the $3.25 and $3.45 range earlier). This significant drop in outlook can be attributed to a $5.6 billion charge related to non-cash inventory write-offs and other charges recorded in Q3’23.
Pfizer’s revenue of $13.2 billion in Q3 was down 42% y-o-y, primarily due to lower sales of its Covid-19 products. The sales growth was 10%, excluding the Covid-19 products. A strong uptick in Vyndaqel, Abrysvo, and Prevnar sales drove this. Looking at its Covid-19 products, Pfizer expects a 70% cut in Comirnaty revenues to $11.5 billion and a 95% fall in Paxlovid revenues of around $1 billion. For the full year 2023, the company expects total revenue to decline over 41% y-o-y to $59.5 billion.
Pfizer’s adjusted net loss of $968 million in Q3 2023 reflected a significant fall from its $10.1 billion profit figure in the prior-year quarter. This can primarily be attributed to a $5.6 billion charge related to non-cash inventory write-offs and other charges. The adjusted loss of $0.17 per share was significantly lower than the profit per share of $1.78 in the prior-year quarter.
|S&P 500 Return||1%||10%||89%|
|Trefis Reinforced Value Portfolio||1%||19%||509%|
 Month-to-date and year-to-date as of 11/2/2023
 Cumulative total returns since the end of 2016