Leading pharmaceutical company Pfizer Inc. (PFE - Get Rating) raised its 2022 earnings guidance after booking a solid third quarter that beat Wall Street expectations. PFE’s Revenue exceeded analysts’ estimates by 7.3%, while its EPS surpassed analysts’ estimates by 10%.

The company expects its earnings per share to be $6.40 to $6.50 for the year, up from its previous forecast of $6.30 to $6.45, and expects revenue of $99.5 billion to $102 billion for the year.

PFE also raised its full-year sales guidance for its Covid-19 vaccine to $34 billion this year, up $2 billion from the company’s previous expectations. In addition, the company also closed major acquisitions of Biohaven and Global Blood Therapeutics in the third quarter deals worth $11.6 billion and $5.4 billion, respectively.

Moreover, in the third quarter, the company reported positive pivotal data for several exciting pipeline programs, including its RSV vaccine candidate for older adults and infants through maternal vaccination, Prevnar 20 for children, etc. In a statement, Albert Bourla, the CEO, said that Pfizer plans to launch 19 new products or new uses for existing drugs in the next 18 months.

In addition, with COVID-19 still a concerning issue, PFE is expected to keep benefitting. As per the National Health Commission, China reported its fourth straight daily record of 39,791 new COVID-19 infections. Mega-cities continue to struggle to contain outbreaks, with Chongqing and Guangzhou recording the bulk of new cases.

PFE shares have gained 7.6% over the past month to close the last trading session at $49.21.

Here is what could influence PFE’s performance in the upcoming months:

Favorable Recent Developments

On November 4, PFE and BioNTech SE (BNTX) announced updated data from a Phase 2/3 clinical trial that demonstrated a robust neutralizing immune response one month after a 30-µg booster dose of the companies’ Omicron BA.4/BA.5-adapted bivalent COVID-19 vaccine. This marks an important step for the company in managing covid infections worldwide.

On November 3, PFE announced that its investigational cancer immunotherapy, elranatamab, received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA) for treating people with relapsed or refractory multiple myeloma (RRMM). This finalized the 12th FDA breakthrough therapy’s designation in Oncology.

Moreover, in early October, PFE announced the completion of the Global Blood Therapeutics, Inc. (GBT) acquisition which reinforces Pfizer’s commitment to SCD, building on a 30-year legacy in the rare hematology space.

Stable Dividend Growth

On September 22, PFE announced a cash dividend of $0.40 per common stock for the fourth quarter, payable on December 5, 2022. Its current annual dividend of $1.60 yields 3.38%, while its four-year average dividend yield is 3.62%.

Moreover, PFE’s dividend payouts have grown at CAGRs of 5.5% and 5.7% over the past three and five years, respectively. The company has 33 years of dividend-paying history and 12 years of consecutive dividend growth.

Solid Financials

During the fiscal third quarter ended September 2022, PFE’s income from continuing operations improved 5.8% year-over-year to $8.65 billion. Its non-GAAP net income attributable to Pfizer Inc. common shareholders rose 39.7% year-over-year to $10.17 billion. Additionally, its non-GAAP EPS grew 40.2% year-over-year to $1.78.

Favorable Analyst Estimates

PFE’s consensus EPS estimate of $6.46 for the current fiscal year ending December 2022 represents a 46.2% improvement year-over-year. The consensus revenue estimate of $100.15 billion for the current year represents a 23.2% increase from last year.

On top of it, the company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.

Robust Profit Margins

PFE’s trailing-12-month EBITDA margin of 44.80% is remarkably higher than the industry average of 3.55%. Its trailing-12-month gross profit margin of 66.16% is 20.62% higher than the industry average of 54.85%. Also, the stock’s trailing-12-month asset turnover ratio of 0.53% is 55.69% lower than the 0.34% industry average.

Additionally, PFE’s trailing-12-month levered FCF margin of 22.85% compares to the industry average of negative 2.44%. Its trailing-12-month ROCE, ROTC, and ROTA of 35.59%, 20.30%, and 15.24% compared to the respective industry averages of negative 39.80%, 22.01%, and 31.22%.

Attractive Valuations

PFE’s forward non-GAAP P/E multiple of 7.62 is 61.3% higher than the industry average of 19.70. In terms of forward EV/EBIT, the stock is trading at 6.83x, which is 61.1% lower than the industry average of 17.57x. Its forward Price/Cash flow multiple of 6.41x is 64% lower than the industry average of 17.80x.

Moreover, its forward EV/Sales is trading at 2.77x, 28.7% lower than the industry average of 3.88x.

POWR Ratings reflect Promise

PFE has an overall A rating, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PFE has an A grade for Value, consistent with its lower-than-industry valuation multiples.

In addition, the stock has a B grade for Sentiment as per its favorable analyst sentiment.

PFE is ranked #2 out of 162 stocks in the Medical-Pharmaceuticals industry.

In addition to the ratings above, we have also given PFE grades for Momentum and Stability. Get access to all PFE ratings here.

Bottom Line

With consistent dividends, raised guidance for the current fiscal year, and new products in line for launch, PFE is expected to create more value for its shareholders.

The company has been consistently growing its revenues and earnings, as PFE’s revenue and net income increased at 23.5% and 22.5% CAGRs over the past three years.

Given its solid financials, robust profitability, attractive valuation, and promising growth prospects, PFE would be a wise addition to your portfolio.

How Does Pfizer Inc. (PFE) Stack up Against Its Peers?

PFE has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Medical-Pharmaceuticals industry with an A (Strong Buy) rating: Novo Nordisk A/S ADR (NVO - Get Rating), Bristol-Myers Squibb Co. (BMY - Get Rating), and AbbVie Inc. (ABBV - Get Rating).

PFE shares were trading at $49.40 per share on Monday afternoon, up $0.19 (+0.39%). Year-to-date, PFE has declined -13.63%, versus a -15.25% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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