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3 Things You Should Expect in Pfizer's Q4 Earnings Update

Keith Speights, The Motley Fool

Pfizer (NYSE: PFE) gave good news and bad news when it reported third-quarter results in October. The big drugmaker beat Wall Street's earnings estimates, but it missed on revenue expectations.

Another quarterly update is just around the corner. On Tuesday, Jan. 29, Pfizer will announce its fourth-quarter and full-year 2018 results. Here are three things you should expect in the pharma company's Q4 update.

Brightly colored pills on a pile of paper money

Image source: Getty Images.

1. Mixed results for key blockbusters

Pfizer currently has 10 blockbuster products in its lineup. It's likely that the company will report mixed results for these top performers.

On the positive side, sales for cancer drug Ibrance will almost certainly continue to increase on a year-over-year basis, thanks to uptake in international markets. Anticoagulant Eliquis, which Pfizer co-markets with Bristol-Myers Squibb, is another surefire winner for Q4. Immunology drug Xeljanz should also see a sales boost, especially as it's picking up steam in expanded indications, in psoriatic arthritis and ulcerative colitis.

There's a good chance that smoking-cessation product Chantix and longtime mainstays Lipitor and Norvasc will also keep up their momentum. The latter two drugs are well past their prime in the U.S. and Europe, but are enjoying solid sales growth in China.

What about the negatives? Although Pfizer won a six-month extension on U.S. patent exclusivity for Lyrica, slipping sales outside of the U.S. will probably drag down overall revenue for the drug. Sales for immunology drug Enbrel and cancer chemotherapy agent Sutent are also likely to continue falling.

There's a question mark on Pfizer's top-selling product, Prevnar 13. Sales for the pneumococcal vaccine jumped 9% year over year in Q3. However, much of this increase came in the U.S., primarily because of the timing of government purchases. Help from the timing of purchases in one quarter can sometimes hurt in the next quarter.

2. A bigger hit from foreign exchange rates

Pfizer narrowed its full-year 2018 revenue guidance in October, lowering the top end of its range from $55 billion to $53.7 billion. One of the key factors cited for this revision was the negative impact of foreign exchange rates, particularly the strength of the U.S. dollar from mid-July through mid-October.

It won't be surprising if Pfizer's Q4 revenue takes an even bigger hit than anticipated from foreign exchange rates. The U.S. dollar was even stronger in relation to the euro in October, November, and much of December than it was in the third quarter.

Note, however, that while the foreign exchange fluctuations could impact revenue, Pfizer's earnings might not be negatively affected. In Q3, foreign exchange helped reduce the company's adjusted cost of sales. As a result, Pfizer's adjusted earnings per share were actually boosted by the positive impact of foreign exchange.

3. No relief from nagging headwinds

Don't expect the key headwinds that plagued Pfizer throughout 2018 to have died down when the company reports its Q4 results. In particular, Pfizer's sales of sterile injectables will likely continue to slide.

But didn't former Pfizer CEO Ian Read say on the company's Q2 conference call that the sterile injectables business would show year-over-year improvement in the latter part of 2018? Yes, he did. However, Read actually said that the company expected improvement to be seen in both the third and fourth quarters. That wasn't the case in Q3, and likely won't be so in Q4 either.

By Pfizer's Q3 conference call, Read had changed his tune a bit. He said that the company expects the product shortage issues causing problems for its sterile injectables unit to be "significantly improved by the end of 2019."

Looking ahead

There's one other thing you can expect in Pfizer's Q4 update -- continued optimism about the company's long-term prospects. New CEO Albert Bourla will no doubt talk up Pfizer's pipeline, which includes a strong roster of candidates and potentially up to 15 blockbuster drugs.

Bourla and other Pfizer executives will also likely point to Pfizer's opportunities after 2020. That's when the company won't have the negative year-over-year comparisons from the coming sales drop-off for Lyrica.

Whatever Pfizer's Q4 results are, the loss of exclusivity for Lyrica will soon be a big problem. On the other hand, whatever the company's Q4 results are, Pfizer's long-term future continues to look pretty good.

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Keith Speights owns shares of Pfizer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.