What to Look For From PFE

George T. Taft

Key Takeaways

  • Analysts estimate adjusted EPS of $0.53 vs. $0.55 in Q4 FY 2019.
  • Revenue is expected to fall for seventh straight quarter amid corporate restructuring and the COVID-19 pandemic.

Pfizer Inc. (PFE), one of the world’s largest drug companies, has recruited Sanofi S.A. (SNY) to help it speed up the production of its COVID-19 vaccine. The goal is to produce millions of new doses of the vaccine, co-developed by Pfizer and BioNTech S.E. (BNTX), to meet soaring demand. Despite major setbacks including supply chain obstacles, longterm high demand for the vaccine could bolster Pfizer’s lackluster profits.

Investors will be focused on whether Pfizer has been able to slow the trend of declining earnings and revenue that began last year when the company reports earnings on February 2, 2021 for Q4 FY 2020. Investors are likely to be disappointed. Analysts expect adjusted earnings per share (EPS) and revenue to fall compared to the year-ago quarter.

One reason for Pfizer’s weaker financial performance this year is due to shelter-in-place measures related to the COVID-19 pandemic that have slowed demand for new prescriptions and vaccinations. Another reason is due to the loss of revenue from its consumer-health business, which was spun off to GlaxoSmithKline PLC (GSK) in a joint venture in mid-2019. The move was part of a broader restructuring that Pfizer is undergoing to focus on developing new drugs with a bigger potential for sales growth. Also part of the restructuring was Pfizer’s spin-off of its off-patent and generic-drug unit Upjohn in November of last year. Upjohn combined with Mylan N.V. to form a new company named Viatris Inc. (VTRS).

Shares of Pfizer have underperformed the broader market over the past year. They had begun to outperform after a sharp rebound from the pandemic-induced market crash that occurred between late February and late March 2020. While that outperformance was short lived, the stock did receive a boost in early November when Pfizer reported its COVID-19 vaccine had an efficacy rate of more than 90%, and jumped again when the company applied for emergency use of its vaccine in the second half of November. But the stock has since retreated, providing a total return of 6.0% over the past 12 months, below the S&P 500’s total return of 13.5%.

Source: TradingView.

The stock tumbled after Pfizer reported earnings for Q3 FY 2020. Adjusted EPS fell 3.2%, marking the fifth consecutive quarter of year-over-year (YOY) declines. Revenue fell 4.3%, the sixth consecutive quarter of declines. Pfizer estimated that the pandemic had an unfavorable impact on revenue of around $500 million. But despite falling revenue and adjusted EPS, CEO Dr. Albert Bourla expressed confidence in the company’s ability to generate longterm growth as a smaller, more focused drug company.

The second quarter marked a recent low for Pfizer’s revenue, which fell 11.0% compared to the same three-month period a year ago. It was the largest decline in revenue in at least 12 quarters. Adjusted EPS dipped 1.7% compared to the year-ago quarter. Similar to Q3, Pfizer noted that the fallout from the pandemic led to an adverse impact on sales of around $500 million, or 4% of total revenue.

Analysts are forecasting adjusted EPS and revenue to fall 3.1% and 4.1%, respectively, in Q4 FY 2020. That would mark the sixth consecutive YOY decline in earnings and the seventh consecutive decline in revenue.

For full-year FY 2020, analysts expect adjusted EPS to fall 7.3%, the first annual decline in at least four years. Revenue is expected to fall 10.5%, the sharpest drop in at least four years. Given these declines, Pfizer will depend heavily on robust sales of its COVID-19 vaccine to engineer a turnaround in its earnings performance.

Pfizer Key Metrics
  Estimate for Q4 2020 (FY) Q4 2019 (FY) Q4 2018 (FY)
Adjusted Earnings Per Share ($) 0.53 0.55 0.63
Revenue ($B) 12.2 12.7 14.0

Source: Visible Alpha

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