Pfizer Inc.’s (PFE) first-quarter results were in-line with the company’s expectations, underlining its continued confidence in achieving 7% to 9% operational revenue growth for the fiscal year 2023. Moreover, the company expects the majority of this growth to occur in the second half of this year, driven by its expected near-term product launches.
Given its solid fundamentals, attractive dividend, and promising growth outlook, investors could consider scooping up shares of PFE for potential gains. In this article, I will discuss several reasons why I am extremely bullish on PFE.
PFE’s first quarter of fiscal 2023 earnings and revenue surpassed analysts’ estimates and posted a slowdown in Covid-19 vaccine sales. The company’s adjusted earnings were $1.23 per share, beating analysts’ expectations of $0.97 a share, and its revenue came in at $18.30 billion, exceeding the Wall Street estimate of $16.59 billion.
The pharmaceutical company is executing on and rigorously planning for an unprecedented number of new product and indication launches, many of which are anticipated to occur in the second half of 2023.
Moreover, PFE has made remarkable progress toward its goal already this year with the U.S. approvals for Zavzpret, Cibinqo for adolescents and Prevnar 20 in pediatric patients, and regulatory filing acceptances for a Braftovi + Mektovi sNDA, sNDA for the Talzenna and Xtandi combination, elranatamab BLA, and its RSV maternal vaccine candidate.
Furthermore, on March 13, PFE and Seagen Inc. (SGEN) announced they had entered into a definitive merger agreement. Under the agreement, PFE will acquire SGEN, a global biotechnology company that discovers, develops, and markets transformative cancer medicines, for $229 in cash per Seagen share for a total value of $43 billion.
By combining SGEN’s category-leading antibody-drug conjugate (ADC) technology with PFE’s expertise and capabilities, the company can accelerate breakthroughs in cancer medicines and introduce new solutions to patients worldwide. This acquisition would enhance PFE’s position in oncology and contribute meaningfully to achieving the company’s near-term and long-term financial goals.
Shares of PFE have gained 6.3% over the past month to close the last trading session at $39.90.
Here is what could influence PFE’s performance in the upcoming months:
Positive Recent Developments
On June 1, PFE announced that the U.S. Food and Drug Administration (FDA) approved ABRYSVO™ (Respiratory Syncytial Virus Vaccine), the company’s bivalent RSV prefusion F (RSVpreF) vaccine, for the prevention of lower respiratory tract disease caused by RSV in older adults.
Also, on May 25, PFE’s PAXLOVID™ received FDA approval for the treatment of mild-to-moderate COVID-19 in adults who are at high risk for progression to severe COVID-19, including hospitalization or death.
Albert Bourla, PFE’s Chairman and CEO, “Today marks a monumental milestone as PAXLOVID became the first COVID-19 oral treatment to be approved by the U.S. FDA, underscoring the value it brings to patients, providers, and health systems alike.”
Such approvals and advancements in PFE’s product pipeline might boost its revenue streams and growth.
Solid Historical Growth
PFE’s revenue has grown at a CAGR of 34.6% over the past three years. Over the same time frame, the company’s EBITDA and net income have increased at CAGRs of 48.3% and 22.7%, respectively. Also, its EPS has grown at a CAGR of 22.1% over the past three years.
Favorable Analyst Estimates
Analysts expect PFE’s EPS for the fiscal year (ending December 2024) to increase 4.5% year-over-year to $3.50. The consensus revenue estimate of $69.39 billion for the same period indicates a marginal year-over-year increase. Moreover, the company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Attractive Dividend
PFE has a record of raising dividends for 12 consecutive years. It pays a dividend of $1.64 per share annually, translating to a yield of 4.11% at the current price. Its 4-year average dividend yield is 3.69%. The company’s dividend payouts have grown at a CAGR of 4.9% over the past three years and 5.3% over the past five years.
Discounted Valuation
In terms of its forward non-GAAP P/E, PFE is trading at 11.68x, 40.9% lower than the industry average of 19.75x. Likewise, the stock’s forward EV/EBIT multiple of 9.81 is 25.1% lower than the industry average of 13.09. And its forward EV/EBITDA of 11.23x is 31.1% lower than the industry average of 16.28x.
In addition, PFE’s forward Price/Sales of 3.24x is 25.3% lower than the 4.33x industry average. The stock’s Price/Cash Flow multiple of 11.91 is 21.6% lower than the industry average of 15.20.
High Profitability
PFE’s trailing-12-month gross profit margin of 68.93% is 23.6% higher than the industry average of 55.77%. Its trailing-12-month EBITDA margin of 43.72% is significantly higher than the industry average of 3.03%. Likewise, the stock’s trailing-12-month net income margin of 31.25% compares to the negative industry average of 7.55%.
Furthermore, PFE’s trailing-12-month ROCE, ROTC, and ROTA of 31.66%, 17.21%, and 14.85% compare to the respective negative industry averages of 42.73%, 23.20%, and 33.28%.
POWR Ratings Show Promise
PFE’s strong fundamentals are reflected in our POWR Ratings system. The stock has an overall rating of B, which translates to a Buy in our proprietary rating 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, in sync with its lower-than-industry valuation. Also, it has a B grade for Sentiment, consistent with its optimistic analyst expectations.
PFE is ranked #36 out of 169 stocks in the Medical-Pharmaceuticals industry.
Beyond what I have stated above, we have also given PFE grades for Quality, Growth, Momentum, and Stability. Get access to all the PFE ratings here.
Bottom Line
The biopharmaceutical company PFE’s fiscal 2023 first quarter results were better than expected, surpassing the consensus estimates for earnings and revenue. Furthermore, the company expects top-line growth of 7% to 9%, excluding its COVID-19 products and anticipated foreign exchange impacts.
PFE continues to make remarkable progress toward an unprecedented number of new products, and indication launches, most of which are anticipated to occur in the second half of this year. Given PFE’s robust financials, low valuation, attractive profitability, reliable dividend, and bright growth prospects, it could be wise to invest in this stock now.
How Does Pfizer Inc. (PFE) Stack Up Against Its Peers?
PFE has an overall POWR Rating of B. One could also check out these other stocks within the Medical-Pharmaceuticals industry with an A (Strong Buy) rating: Johnson & Johnson (JNJ), Merck & Co. Inc. (MRK), and Astellas Pharma Inc. (ALPMY).
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PFE shares were trading at $39.74 per share on Tuesday morning, down $0.16 (-0.40%). Year-to-date, PFE has declined -20.88%, versus a 14.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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