Pfizer as the Bull of the Day and Mesa Air Group have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – February 7, 2022 – Zacks Equity Research shares Pfizer PFE as the Bull of the Day and Mesa Air Group MESA asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on BP plc BP, PBF Energy Inc. PBF and Viper Energy Partners VNOM.
Here is a synopsis of all five stocks:
Bull of the Day:
Pfizer, a Zacks Rank #1 (Strong Buy), is a long-term stock market winner within the Zacks Medical sector. The stock hit an all-time high this past December before retreating slightly as the market has taken a breather to kick off the new year. PFE sports the highest Zacks Momentum Style Score of ‘A,’ and this pullback in the stock price represents a solid buying opportunity for investors. PFE continues to benefit from strong demand for its diversified drug and vaccine portfolio.
Company Description
Pfizer is a global pharmaceutical company that discovers, develops, manufactures, and distributes medicines for humans and animals. PFE’s diversified portfolio includes biologic and small molecule medicines, vaccines, and nutritional healthcare products.
Pfizer’s suite of biopharmaceutical products targets various therapeutic areas such as cardiovascular pain, chronic immune and inflammatory diseases, immunotherapy and related cancer treatments, anti-infective remedies, pneumococcal disease, meningococcal disease, and COVID-19. PFE is comprised of six business units — Oncology, Inflammation & Immunology, Rare Disease, Hospital, Vaccines and Internal Medicine.
Pfizer is also involved in the contract manufacturing business in which it serves wholesalers, retailers, hospitals, clinics, governments, and pharmacies. PFE was founded in 1849 and is based in New York, NY.
Sales and Earnings Trends
In Q3 2021, PFE delivered revenues of $24.09 billion, outpacing sales estimates by 7.5%. The pharmaceutical giant reported EPS of $1.34, which handily beat the Zacks Consensus Estimate of $1.08 by 24.07%. Pfizer has posted a four-quarter trailing average earnings surprise of 10.85%.
For the most recent quarter (Q4 ‘21), analysts are expecting sales to have surged 104.79% year-over-year to $23.93 billion. The Zacks Consensus Estimate for Q4 EPS is $0.85, which would represent growth of 102.38% compared to the same quarter in 2020. If PFE were able to hit this quarterly mark, the company will have achieved annual EPS growth of 88.74% to $4.19 for 2021.
As we move further into the new year, analysts covering PFE have notably increased their 2022 EPS estimates by 39.65% in just the past 60 days. The Zacks Consensus Estimate is now $6.41, translating to growth of 52.98% versus last year. Sales are anticipated to rise by 33.16% to $108.6 billion. Clearly, the sales and earnings trends point to continued growth for PFE.
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) seeks to identify companies that have recently seen positive earnings estimate revision activity. The idea is that this more recent information may prove to be more accurate and serve as a better predictor of the future, which can give investors a leg up during earnings season.
The proprietary technique has proven to be quite useful. In fact, when combining a Zacks #3 Rank with a positive Earnings ESP, stocks produced a positive surprise 70% of the time and witnessed average annual returns of 28.3% according to our 10-year backtest.
With a Zacks Rank #1 and a positive Earnings ESP (+1.18%), another earnings beat may be in the cards for PFE when the company reports its Q4 results on February 8th.
Charting the Course
PFE has advanced over 118% off the March 2020 lows, outperforming the S&P 500 over that time frame. The stock started to display true signs of relative strength in the last year as it returned investors north of 58.17%, widely outperforming the major indices.
Pfizer found support during its bullish run at the 200-day moving average in mid-October this past year before ultimately surging into year-end. The stock has experienced a mild correction this year as the market fell in January. This short-term decline is providing bulls with a solid entry point.
PFE is relatively undervalued even after its historic run in the past year, trading at just an 8.33 forward P/E. For comparison purposes, Pfizer’s industry group trades at a 13.01 forward P/E while the S&P 500’s forward P/E sits at 19.23.
Growth Strategy
Pfizer boasts a sustainable pipeline with numerous blockbuster products in its portfolio and multiple late-stage programs that can drive growth. In addition, Pfizer and partner BioNTech’s COVID-19 vaccine is now approved for emergency use in many countries and is fully approved in the United States. The duo has already shipped 2 billion doses to more than 150 countries and are expected to have manufactured 3 billion doses as of December 2021. In addition, Pfizer’s oral antiviral pill for COVID-19 was approved in December and will further increase revenues this year.
PFE has been quite aggressive in terms of its inorganic growth strategy. The biopharma behemoth has made several key acquisitions over the years including immuno-oncology company Trillium Therapeutics in November 2021; cancer-focused biotech Array BioPharma in July 2019; biopharma company Medivation in September 2016; Anacor a few months earlier in June 2016; sterile injectable drugs manufacturer Hospira in September 2015; King Pharmaceuticals in February 2011; and Wyeth in October 2009.
PFE also announced this past December that it has entered into an agreement to acquire Arena Pharmaceuticals, a clinical-stage firm focused on developing innovative potential therapies for the treatment of several immuno-inflammatory diseases.
Bottom Line
PFE is part of the Zacks Medical sector, which ranks in the top 50% of all Zacks sectors. As such, we expect this group to outperform the market over the next three to six months. Quantitative research studies have shown that approximately 50% of a stock’s future price movement is due to the group that it’s in. Making sure we identify stocks within the top Zacks Ranked Sectors is of utmost importance, and PFE certainly fits the bill.
With a dividend yield of 3% and a top Zacks VGM score of ‘A,’ it’s not hard to see why PFE is a top stock pick. Robust sales and earnings growth along with a strong technical trend will help to provide a cushion during this market decline. Recent positive earnings estimate revisions should also serve to create a ‘floor’ for any sudden or unexpected downside moves. If you haven’t already done so, make sure to put PFE on your shortlist.
Bear of the Day:
Mesa Air Group operates as a holding company for Mesa Airlines, which provides flight carrier services via purchase agreements with American Airlines as well as United Airlines. The airliner offers passenger transportation and regional air services. MESA also engages in leasing aircrafts to third parties. Mesa Air Group was founded in 1982 and is based out of Phoenix, AZ.
The Zacks Rundown
MESA, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Transportation – Airline industry group, which is ranked in the bottom 2% of all 254 industry groups. As such, we expect this industry group to underperform the market over the next three to six months. This industry group is part of the Zacks Transportation sector, which is ranked dead last out of all 16 Zacks sectors.
As a general rule of thumb, we want to target stocks in the top-performing industries as historical research has shown that roughly half of a stock’s future price appreciation is due to its industry grouping. We therefore want to avoid stocks in the bottom 50% of all Zacks Ranked Industries. Candidates in the worst-performing industry groups and sectors can often represent good shorting opportunities, as their industry performance provides a headwind to any potential rally attempts.
Recent Earnings and Future Estimates
MESA has been experiencing a streak of earnings disappointments, missing estimates in each of the past two quarters. In fiscal Q4, MESA reported EPS of $-0.06, missing the Zacks Consensus Estimate of $0.12 by -150%.
For the most recent quarter (fiscal Q1 ’22), analysts have drastically reduced their earnings estimates as of late. The Zacks Consensus Estimate is now $-0.08, reflecting a -140% drop in just the past 60 days. A variety of deterrents including the Omicron variant likely contributed to the steep decline. This would translate to a reduction in quarterly EPS of -122.22% relative to the same quarter in the prior year. MESA is scheduled to report these quarterly results this Wednesday, February 9th.
The picture doesn’t improve for the regional airline carrier as we zoom out and view 2022 annual EPS estimates, which also have witnessed a substantial fall of -91.43% over the past 60 days. Analysts are now anticipating a regression in EPS of -85.94% to $0.09 versus last year. Consensus estimates are falling across the board along with the stock. Declining earnings estimates are a good sign for the bears.
Technical Outlook
As we can see below, MESA is in a sustained downtrend. Note how the stock has plunged below all of the moving averages and is making a series of lower lows. It’s also important to point out that all of the moving averages have rolled over and are sloping downward, the opposite of what the bulls would like to see.
The stock is down nearly 34% over the past year and is showing no signs of a reversal. MESA has continued its downward trend, falling nearly 15% to kick off the new year. Even with the recent price decline, the stock is still relatively overvalued based on a forward P/E of 58.47.
Final Thoughts
Our Zacks Style Scores illustrate a deteriorating investment picture for MESA, as the company is rated a worst possible ‘F’ in Momentum and has an overall ‘D’ VGM score. Recent earnings misses and declining future estimates signal more trouble on the horizon. The fact that MESA is included in a bottom-performing industry group and worst-possible sector simply adds to the growing list of concerns. Investors will want to steer clear of an overvalued MESA until the situation shows major signs of improvement.
Additional content:
Factors You Must Pay Attention to When BP (BP) Reports Earnings
BP plcis set to report fourth-quarter 2021 results on Feb 8.
In the last reported quarter, BP comfortably beat the Zacks Consensus Estimate, which was largely driven by higher realizations of commodity prices and a stronger refining business. It beat the consensus estimate thrice in the prior four quarters, while missing the same on one occasion, with an average earnings surprise of 10.82%.
BP p.l.c. price-eps-surprise | BP p.l.c. Quote
Let’s see how things have shaped up prior to this announcement.
Trend in Estimate Revision
The Zacks Consensus Estimate for its fourth-quarter earnings per share of $1.18 has witnessed one downward revision and three upward revisions in the past 60 days. The estimated figure suggests a massive improvement from the prior-year reported number.
The consensus estimate for fourth-quarter revenues of $42.1 billion indicates a 13.3% decline from the year-ago reported figure.
Factors to Consider
The pricing scenario of oil in fourth-quarter 2021 improved drastically from the prior-year period, thanks to the rolling out of coronavirus vaccines. The pricing environment of natural gas also improved dramatically in the December quarter from the year-ago period. The rise in oil and natural gas prices is likely to have aided BP’s upstream businesses.
The Zacks Consensus Estimate for BP’s replacement cost (RC) profit before interest and tax from oil production & operations is pegged at $3,000 million, reflecting a massive improvement year over year.
However, owing to seasonal demand, BP expects its refining margins to be lower in the December quarter of 2021.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for BP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here as you will see below.
Earnings ESP: BP’s Earnings ESP is -5.96% as the Most Accurate Estimate is $1.11 per share while the Zacks Consensus Estimate is $1.18 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: BP currently sports a Zacks Rank #1.
Stocks to Consider
Here are a few firms that you may want to consider as these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:
PBF Energy Inc. has an Earnings ESP of +22.25% and is a Zacks #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
PBF Energy is scheduled to release fourth-quarter results on Feb 10. The Zacks Consensus Estimate for PBF’s earnings is pegged at 53 cents per share, suggesting an increase of 111.7% from the prior-year reported figure.
Viper Energy Partners has an Earnings ESP of +14.93% and a Zacks Rank of 3.
Viper Energy is scheduled to report fourth-quarter results on Feb 22. The Zacks Consensus Estimate for Viper Energy’s earnings is pegged at 19 cents per unit, suggesting an improvement of 58.3% compared to the prior-year reported figure.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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BP p.l.c. (BP) : Free Stock Analysis Report
Pfizer Inc. (PFE) : Free Stock Analysis Report
PBF Energy Inc. (PBF) : Free Stock Analysis Report
Viper Energy Partners LP (VNOM) : Free Stock Analysis Report
Mesa Air Group, Inc. (MESA) : Free Stock Analysis Report
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