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What's in the Cards for Pfizer (PFE) This Earnings Season?

Zacks Equity Research

Pfizer, Inc. PFE will report its second-quarter 2019 results on Jul 30, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 10.39%.

Pfizer’s shares have declined 2.2% this year so far compared with a decline of 0.8% for the industry.

 

 

This pharma giant’s earnings surpassed expectations in each of the last four quarters, leading to an average positive surprise of 5.65%.

Pfizer Inc. Price, Consensus and EPS Surprise

 

Pfizer Inc. Price, Consensus and EPS Surprise

Pfizer Inc. price-consensus-eps-surprise-chart | Pfizer Inc. Quote

Factors at Play

Higher sales of Pfizer’s key brands, Ibrance, Chantix, Prevnar 13/Prevenar 13 and Xeljanz and alliance revenue from Xtandi and Eliquis in the Biopharma segment should make up for lower sales in the Upjohn segment.

Continued strong uptake in international markets should make up for moderating volumes in United States and drive Ibrance sales. Xeljanz sales should be driven by continued growth in rheumatoid arthritis (RA) revenues and contributions from the drug's recent expansion into psoriatic arthritis and ulcerative colitis.

The Zacks Consensus Estimate for sales of Ibrance worldwide and Xeljanz is 1.17 billion, and $579 million, respectively.

Pfizer has exclusive rights to Amgen, Inc.’s AMGN blockbuster RA drug, Enbrel, outside the United States and Canada. Enbrel sales will continue to decline in the quarter due to biosimilar competition in key European markets. Prevnar 13 vaccine revenues improved in the United States in the first quarter, reflecting increased government purchases for the pediatric indication. It remains to be seen if the improved sales trend continues in the second quarter.  The Zacks Consensus Estimate for sales of Enbrel and Prevnar is $436 million and $1.30 billion, respectively.

Biosimilars are also expected to contribute to Biopharma segment’s sales in the second quarter.

In the Upjohn segment, strong growth in emerging markets (mainly China) will most likely be offset by decline in developed markets due to lower revenues from Viagra/authorized generic version, Lyrica and Greenstone, Upjohn's authorized generic subsidiary, primarily due to industry-wide pricing challenges in the United States.

Last month, Pfizer announced a definitive agreement to buy Array BioPharma ARRY for $48 per share in cash for a total enterprise value of approximately $11.4 billion, in a bid to strengthen its cancer portfolio. We expect investors to question Pfizer management on the progress of the acquisition and integration plans for the same.

In the quarter, Pfizer gained FDA approval for tafamidis to treat transthyretin amyloid cardiomyopathy; Bavencio+Inlyta combo for first-line treatment of advanced renal cell carcinoma and Zirabev and Ruxience, its biosimilar versions of Roche’s cancer drugs Avastin and Rituxan, respectively. Pfizer also gained EU approval for new cancer drugs Talzenna, Vizimpro and Lorviqua, all approved in the United States in 2018. An update on the commercialization plans of these drugs may be provided on the call.

What Our Model Indicates

Our proven model does not conclusively show that Pfizer is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Earnings ESP: Its Earnings ESP is 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at 77 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Pfizer’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Here’s a large biotech stock that has the right combination of elements to beat on earnings this time around:

Gilead Sciences, Inc. GILD with an Earnings ESP of +3.20% and a Zacks Rank #2. The company is scheduled to release results on Jul 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Pfizer Inc. (PFE) : Free Stock Analysis Report
 
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