On Tuesday, pharma giant Pfizer (PFE) reported a standout quarter. The results contrasted those of most other large-cap pharma companies.
Surprisingly, the strong showing did not seem to matter on Wall Street. On the earnings news, Pfizer stock was able to churn out only a measly gain of 12 cents a share, with it now currently trading at $39.97.
True, Pfizer has been in the rally mode lately. Since early March, its shares have gained about 18% or so. Yet this still appears underwhelming considering the strong momentum rippling throughout the company. Not only is the COVID-19 vaccine a huge success, but several of Pfizer’s other drugs, such as Vyndaqel/Vyndamax, a heart drug, are selling at a rapid pace. All around, Pfizer’s business is thriving.
Q1 Results – Pfizer’s Numbers
Adjusted diluted earnings came in at 93 cents a share, which beat the consensus estimate of 77 cents a share. As for the top line, the revenues hit $14.6 billion, whereas analysts were expecting only $13.4 billion in revenue. (See Pfizer stock analysis on TipRanks)
Pfizer’s management believes that the good times will continue, and has upgraded guidance for the full year. The company now believes that earnings will range from $3.55 to $3.65 per share, up from the prior estimate of $3.10 to $3.20 per share. In terms of revenue, Pfizer expects to see from $70.50 billion to $72.5 billion, compared to its previous estimate of $59.4 billion to $61.4 billion.
Of course, the main catalyst for the expanded earnings projection is the COVID-19 vaccine. Pfizer upped its sales forecast on this, raising its original expectation of $15 billion to $26 billion for the year.
Moreover, the vaccine is not likely to be a short-term phenomenon. Note that the company is currently in negotiations with governments of several countries to continue supplying doses of the vaccine for the next few years.
In the meantime, the company has made considerable progress on improving the vaccine. For example, Pfizer expects to get preliminary results for its booster shot in July. The company is also likely to get full approval for the vaccine from the U.S. Food and Drug Administration (FDA), which would allow Pfizer to market it directly to the public. Until now, the FDA approval for the vaccine was on an emergency basis only.
Wall Street Weighs In
With an average analyst price target of $42.20, the upside potential lands at 5.58%. According to TipRanks’ consensus breakdown, PFE is a Hold, with 2 Buy ratings and 9 Hold ratings assigned in the last three months.
Bottom Line On Pfizer
Pfizer’s COVID-19 vaccine, which was created in partnership with BioNTech (BNTX), is truly amazing in terms of its effectiveness. It showcases the transformative power of the messenger RNA technology. In fact, Pfizer is looking at ways to leverage this technology for other vaccines and medical treatments.
No doubt, by being the first company to launch the COVID-19 vaccine, Pfizer has gained an outsized portion of the opportunity inherent in a COVID-19 vaccine.
With the significant increase in earnings, Pfizer will find more opportunities to strike partnerships and make acquisitions to fuel growth. It will also have more resources for buybacks and dividend increases as well.
Furthermore, the dividend yield on the stock is already quite attractive at 3.9%. The valuation is reasonable too; the forward price-to-earnings ratio is only 10.84X.
Given all of the above, it is seemingly inexplicable that Pfizer stock has not performed better. Then again, this gives savvy investors an opportunity to get a good entry point on the stock.
Disclosure: Tom Taulli has a long position in Pfizer stock.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
