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Pfizer (PFE) Down 1.3% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Pfizer (PFE). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Pfizer due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Pfizer Q4 Earnings Miss, Sales Beat, 2021 View Upbeat

Pfizer’s fourth-quarter results were mixed as it missed estimates for earnings while beating the same for sales. Pfizer’s financial outlook for 2021 was quite upbeat.

Pfizer reported fourth-quarter 2020 adjusted earnings per share of 42 cents, which missed the Zacks Consensus Estimate of 46 cents. Earnings however rose 14% year over year.

Revenues came in $11.68 billion, which beat the Zacks Consensus Estimate of $11.01 billion. Sales rose 12% from the year-ago quarter on a reported basis and 11% on an operational basis.

The fourth quarter of 2020 results marked the first quarterly result for the “New Pfizer”. Pfizer’s Biopharma unit became the “New Pfizer” following the separation of the Upjohn unit.

Higher sales of brands like Eliquis, Ibrance, Inlyta, Prevnar 13/Prevenar 13, Vyndaqel/Vyndamax and Xeljanz and higher biosimilars revenues drove sales growth. Importantly, Pfizer and partner BioNTech’s COVID-19 vaccine, BNT162b2 contributed $154 million in sales in the fourth quarter. Weaker sales of Chantix in the United States and Enbrel internationally partially offset the increase.

Excluding sales of BNT162b2, revenues grew 9% operationally

International revenues rose 9% to $5.8 billion. On an operational basis, international sales rose 7% in the quarter. U.S. revenues rose 15% to $5.9 billion.

Adjusted selling, informational and administrative (SI&A) expenses declined 2% (operationally) in the quarter to $3.58 billion due to the exclusion of Consumer Health costs and lower selling expenses due to the pandemic. Adjusted R&D expenses rose 24% to $3.07 billion due to costs related to development of COVID-19 vaccines.

Segment Discussion

Oncology revenues increased 21% (on an operational basis) to $3.02 billion. Vaccine revenues rose 16% to $2.0 billion. Internal Medicine rose 1% to $2.3 billion. The Inflammation & Immunology franchise was flat at $1.3 billion. The portfolio of Rare Disease rose 24% to $865 million. Hospital sub-segment’s sales rose 7% to $2.2 billion.

Ibrance revenues rose 11% year over year to $1.43 billion driven by strong CDK class market penetration.

Inlyta revenues were $228 million in the quarter, up 41% driven mainly by growth in the United States and developed Europe, following FDA approvals in 2019 for the combination use of Inlyta in first-line treatment of advanced renal cell carcinoma patients.

Global Prevnar 13/Prevenar 13 revenues rose 10% to $1.75 billion due to higher sales in developed Europe and the United States. Prevnar 13 revenues rose 11% in the United States due to the favorable timing of government purchases for the pediatric indication, which offset the negative impact of the revised Advisory Committee on Immunization Practices (ACIP) recommendations in 2019 (shared decision making) for the adult indication. Prevenar 13 revenues rose 10% in international markets driven by increased adult uptake.

Enbrel revenues declined 18% to $345 million in key European markets, Japan and Brazil due to continued biosimilar competition.

Eliquis alliance revenues and direct sales rose 14% to $1.26 billion driven by continued increased adoption in nonvalvular atrial fibrillation as well as oral anticoagulant market share gains in the emerging markets, developed Europe and United States. However, lower prices, increased impact from the Medicare donut hole, and unfavorable channel mix hurt Eliquis’ U.S. sales in the fourth quarter. Xalkori sales declined 9% to $135 million. Xtandi recorded alliance revenues of $283 million in the quarter, up 16% year over year. Sutent sales declined 13% to $203 million. Chantix sales declined 33% to $191 million in the quarter due to loss of exclusivity in November 2020 and decline in patient visits due to COVID-19.

Xeljanz sales rose 14% to $696 million driven by growth in both the United States and international developed markets.

Importantly, new drug Vyndaqel/Vyndamax recorded sales of $429 million in the quarter compared with $351 million in the previous quarter driven by growing demand.

Braftovi and Mektovi, which Pfizer acquired following its acquisition of Array BioPharma in 2019, recorded sales of $45 million and $39 million, respectively in the fourth quarter of 2020.
Total biosimilar revenues were $525 million, up 86% year over year driven by new oncology biosimilars (Trazimera, Zirabev and Ruxience) as well as continued growth from Retacrit (a biosimilar of Epogen and Procrit) in the United States. Retacrit recorded $108 million of revenues in the quarter compared with $102 million in the previous quarter. Inflectra/Remsima recorded sales of $188 million globally, up 4% year over year.

Sterile injectables global revenues rose 11% operationally to $1.49 billion.

Regarding its COVID-19 vaccine, Pfizer said on the call that in addition to achieving its commitment for 2020, it has supplied 65 million doses globally as on Jan 31. It expects to deliver 200 million doses to the United States by the end of May. By the end of 2021, Pfizer believes it can deliver at least 2 billion doses in total.

2020 Results

Full-year 2020 sales rose 2% to $41.9 billion, missing the Zacks Consensus Estimate of $43.95 billion and also falling slightly short of the guided range of $40.8 billion to $42.4 billion for the “New Pfizer”. Sales rose 3% on an operational basis.

Adjusted earnings for 2020 were $2.22 per share which also missed the Zacks Consensus Estimate of $2.31 and fell short of the guided range of $2.28-$2.38 for the “New Pfizer”. Earnings were up 16% year over year.

2021 Guidance

Pfizer raised its previously issued earnings guidance for 2021 while providing financial guidance for adjusted revenues and other items. Pfizer expects continued recovery in macroeconomic and healthcare activity throughout 2021 as vaccinations continue.

Revenues are expected in the range of $59.4 billion to $61.4 billion, indicating growth of 44% from 2020 levels. The revenue guidance includes approximately $15 billion in sales from BNT162b2. Excluding BNT162b2, total revenues in 2021 are expected to be in the range of $44.4 billion to $46.4 billion, reflecting operational growth of 6% from 2020 levels, in line with its long-term revenue CAGR.

Adjusted earnings per share guidance was raised to a range of $3.10-$3.20 from the prior expectation of $3.00-$3.10 (guided on Jan 12) driven by higher BNT162 revenue contribution. The earnings guidance indicates 42% increase over 2020 actual results. Excluding BNT162b2, EPS is expected to be $2.50-$2.60 in 2021, reflecting operational growth of 11% from 2020 levels.

Foreign exchange is expected to benefit 2021 revenues by 3% and EPS by 4%.

Research and development expense is expected in the range of $9.2-$9.7 billion. SI&A spending is expected in the range of $11.0-$12.0 billion. Adjusted tax rate is expected to be approximately 15% in 2021. The company does not expect to make any share repurchases in 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Pfizer has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Pfizer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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