What Factors Will Drive Pfizer’s Q1 Performance?

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Pfizer (NYSE: PFE) is scheduled to report its Q1 2024 results on Wednesday, May 1. We expect the company to post revenue of $13.8 billion and earnings of $0.50 on a per share and adjusted basis. The company is likely to see a continued decline in sales due to lower demand for its Covid-19 products — Paxlovid and Comirnaty. These two products together garnered $7 billion in Q1’23 and their sales are expected to be much lower in Q1’24. However, excluding the Covid-19 products, the company’s sales will likely trend higher. Not only do we expect Pfizer to navigate well in Q1, we think its stock has some room for growth from its current levels of around $25. Our interactive dashboard analysis of Pfizer’s Earnings Preview has more details on how the company’s revenues and earnings will likely trend for the quarter. So, what are some of the trends that are likely to drive Pfizer’s results?

Firstly, let us look at Pfizer’s stock performance in recent years. PFE stock has faced a notable decline of 30% from levels of $35 in early January 2021 to around $25 now, vs. an increase of about 35% for the S&P 500 over this roughly three-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 -44% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — 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. 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.

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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, Pfizer looks like it has some room for growth. We estimate Pfizer’s Valuation to be $29 per share, reflecting a 15% upside from the current market price of $25. PFE stock currently trades at 12x forward expected earnings of $2.14 per share in 2024, lower than its 15x average over the last five years. However, the valuation multiple has fluctuated in a wide range in recent years due to a strong earnings growth during the Covid-19 pandemic phase, driven by its vaccine and antiviral therapy. A valuation multiple slightly lower than its historical average seems justified, in our view.

Looking at the previous quarter, Pfizer’s revenue of $14.2 billion in Q4 was down 42% y-o-y, primarily due to lower sales of its Covid-19 products. The sales growth was 8%, excluding the Covid-19 products. A strong uptick in Vyndaqel and Abrysvo aided the overall sales. Pfizer’s adjusted net margin plunged over 2200 bps to 4.2% due to restructuring costs of $2.6 billion and SG&A and R&D expenses as a percentage of revenue rising y-o-y. Lower revenues and margin contraction resulted in earnings of $0.10 on a per-share and adjusted basis, compared to $1.14 in the prior-year quarter.

Coming to the latest quarter, we think it will be a similar trend as in the previous quarter, with Covid-19 products seeing a decline in sales, while Vyndaqel and Abrysvo gain market share. It will be interesting to see how the sales of its pneumonia vaccine – Prevnar – trend during the quarter, given that it missed the street estimates by a wide margin in the previous quarter. Pfizer expects its 2024 revenue to fall between $58.5 billion and $61.5 billion, and its adjusted earnings to be in the range of $2.05 to $2.25 per share.

While PFE stock looks like it has some room for growth, it is helpful to see how Pfizer’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Returns Apr 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 PFE Return -9% -12% -22%
 S&P 500 Return -4% 6% 125%
 Trefis Reinforced Value Portfolio -6% 0% 613%

[1] Returns as of 4/26/2024
[2] Cumulative total returns since the end of 2016

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