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Pfizer’s PFE Q3 earnings report on November 1 will give insight into the company’s ability to sustain growth from its Covid-19 vaccines. Vaccinations gave PFE a boost during the pandemic with the stock up nicely over the last few years.
Post-pandemic, revenue from Covid-19 vaccines may eventually start to fade and investors may want to start paying attention to other business units in the company.
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Business Units
Pfizer’s business is comprised of six business segments – Oncology, Inflammation & Immunology, Rare Disease, Hospital, Vaccines, and Internal Medicine. During the second quarter, the vaccines segment was up 13% from Q2 2021 at $10.45 billion. This accounted for more than a third of the company’s Q2 revenue with the rare disease segment the only other unit seeing a year over year increase.
Still, Pfizer posted record quarterly sales at $27.7 billion. Pfizer beat on both its top and bottom lines during Q2 and blasted earnings expectations by 16% at $2.04 per share. This was driven by strong contributions in its covid-19 vaccine Comirnaty and covid antiviral Paxlovid. While Q3 could see another boost from vaccines Wall Street will eventually be looking for additional growth among its other segments.
Q3 Outlook
The Zacks Consensus Estimate for PFE’s Q3 earnings is $1.47 per share, which would be a 10% increase from Q3 2021. Sales for Q3 are expected to be down -12% at $21.04 billion. This would show that Pfizer effectively managed operating costs and perhaps had some pricing power to boost its bottom line.
However, estimates for the period have largely gone down from $1.91 per share at the beginning of the quarter. Year over year, PFE earnings are expected to climb 44%, but decline -17% in FY23 at $5.28 per share as it comes up against difficult to compete against periods. With that being said, Fiscal year 2023 earnings estimates have started to rise over the last week.
Performance & Valuation
PFE is down -22% in 2022 to roughly match the S&P 500’s decline while underperforming its peer group’s +1% which includes notable companies like Johnson & Johnson JNJ and AbbVie ABBV. When including dividends over the last 5 years, PFE’s total return is + 65% to slightly outperform the benchmark and beat its peer group’s +34%.
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This year’s drop in PFE could be an opportunity for longer-term investors. Trading around $46 a share, PFE has a forward P/E of 7.2X. This is below the industry average of 13.3X. Even better, PFE trades below its decade-high of 17.5X and the median of 13.1X.
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Bottom Line
Third quarter earnings will give investors knowledge of Pfizer’s ability to expand Covid-19 revenue. Vaccine revenue will most likely fade as we move further away from the pandemic. The company’s ability to beat earnings expectations may rely on the growth of other business units during the quarter.
PFE currently lands a Zacks Rank #3 (Hold) and its Large Cap Pharmaceuticals Industry is in the top 33% of over 250 Zacks Industries. PFE offers a solid 3.47% annual dividend yield at $1.60 per share and the Average Zacks Price Target suggests 28% upside from current levels.
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