Pfizer (PFE) Down 9.4% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Pfizer (PFE). Shares have lost about 9.4% 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. Q3 Earnings & Sales BeatPfizer reported third-quarter 2024 adjusted earnings per share of $1.06, which crushed the Zacks Consensus Estimate of 64 cents per share. The company had recorded an adjusted loss of 17 cents per share in the year-ago quarter. Earnings growth was driven by improved revenues and lower costs and taxes.Revenues came in at $17.7 billion, up 31% from the year-ago quarter on a reported basis, reflecting an operational increase of 32% and a negative currency impact of 1%. Total revenues significantly beat the Zacks Consensus Estimate of $15.19 billion.Higher sales of Pfizer’s key non-COVID products like Vyndaqel and Eliquis, new product launches and newly acquired products drove the top line in the quarter. COVID products also contributed to top-line growth in the quarter amid heightened demand for Paxlovid during the recent COVID-19 wave. Sales of key drugs Xeljanz and Ibrance declined in the quarter.Seagen drugs contributed $854 million to the top line in the third quarter. Revenues from Pfizer’s non-COVID products rose 14% operationally in the third quarter, following a strong performance in the first half. International revenues declined 6% on an operational basis to $5.64 billion. U.S. revenues rose 50% to $12.06 billion.Adjusted selling, informational and administrative (SI&A) expenses rose 1% (operationally) in the quarter to $3.22 billion, as increased spending behind recently acquired and launched products was partially offset by due to lower U.S. healthcare reform fees. Adjusted R&D expenses declined 4% to $2.56 billion as higher spending on certain acquired assets from Seagen was partially offset by lower spending on some vaccine programs and savings from the cost realignment program.Segment DiscussionPfizer reports its revenues under three broad sub-segments of its Biopharma operating segment — Primary Care, Specialty Care and Oncology. Sales of the Primary Care segment rose 44% operationally to $9.06 billion. The Specialty Care unit recorded sales of $4.29 billion, up 15%. Sales of Oncology rose 31% to $4.04 billion, driven by strong contributions from Padcev, Xtandi, Lorbrena and Braftovi/Mektovi.Primary CareIn Primary Care, alliance revenues and direct sales from Bristol-Myers for Eliquis rose 9% to $1.62 billion driven by continued share gains in the oral anti-coagulant market. However, sales were hurt by generic competition in some international markets due to loss of patent exclusivity. Alliance revenues from Bristol-Myers-partnered Eliquis beat the Zacks Consensus Estimate of $1.54 billion as well as our model estimate of $1.53 billion.Global Prevnar family revenues declined 2% to $1.8 billion, driven by fewer adult vaccinations in the United States and lower pediatric indication sales in most international developed markets and certain emerging markets. The Prevnar family includes revenues from Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20 (adult and pediatric). Prevnar revenues were in line with the Zacks Consensus Estimate as well as our model estimate. Prevnar sales rose 1% in the United States but declined 7% in international markets.Direct sales and alliance revenues from BioNTech for Comirnaty were $1.42 billion in the quarter, up 9% year over year, driven by the favorable timing of stocking in the United States due to earlier-than-expected approval of the updated shot, partially offset by lower demand in international markets. Comirnaty sales beat the Zacks Consensus Estimate of $1.03 billion and our estimate of $1.13 billion.Paxlovid revenues were $2.7 billion compared with $202 million in the year-ago quarter, driven by strong demand in the United States backed by a recent COVID wave. Also, a one-time contractual delivery to the U.S. Strategic National Stockpile led to sales growth. Paxlovid revenues beat the Zacks Consensus Estimate of $1.3 billion. Pfizer believes that the demand for Paxlovid has stabilized.Newly acquired product Nurtec ODT/Vydura contributed $337 million in the quarter, which is up 45% year over year driven by strong demand in the United States and launches in international markets.Among the new products, Pfizer’s RSV vaccine, Abrysvo, recorded sales of $356 million in the third quarter compared with $56 million in the previous quarter. Abrysvo revenues beat the Zacks Consensus Estimate of $200 million as well as our model estimate of $280 million.Specialty CareGlobal Vyndaqel family revenues of $1.45 billion rose 63% year over year, driven by continued demand growth, primarily in the United States and developed Europe. The Vyndaqel family includes global revenues from Vyndaqel as well as revenues for Vyndamax in the United States and Vynmac in Japan. Vyndaqel family sales beat the Zacks Consensus Estimate of $1.41 billion as well as our model estimate of $1.38 billion.Xeljanz sales declined 35% to $321 million. Enbrel revenues declined 16% to $169 million.New product Oxbryta generated sales of $17 million in the third quarter of 2024, down 80% year over year. In September, Pfizer announced that it is voluntarily withdrawing all lots of Oxbryta from the global markets where it is approved. Another new drug, Cibinqo recorded revenues of $63 million in the third quarter, up 74% year over year.OncologyPfizer’s top-line numbers in the third quarter of 2024 included revenues from the acquisition of Seagen, which closed in mid-December 2023. The acquisition added Seagen’s antibody-drug conjugates or ADCs — Adcetris, Padcev, Tukysa and Tivdak — to Pfizer’s cancer portfolio. Adcetris, Padcev, Tukysa and Tivdak contributed $268 million, $409 million, $124 million and $34 million, respectively, to Pfizer’s oncology revenues in the third quarter. In Oncology, Ibrance revenues declined 12% year over year to $1.09 billion. Lower demand trends globally due to competitive pressure and price decreases in some developed international markets hurt sales growth. Ibrance revenues missed the Zacks Consensus Estimate of $1.1 billion and our estimate of $1.13 billion.Xtandi alliance revenues were $561 million in the quarter, up 28% year over year, driven by strong demand following approval for expanded use in non-metastatic castration-sensitive prostate cancer received in the fourth quarter of 2023. Inlyta revenues were $247 million in the quarter, down 1%. Lorbrena revenues were $206 million in the quarter, up 31%. Braftovi/Mektovi revenues were $173 million, up 32% year over year.Revenues from oncology biosimilars were $285 million, down 7% year over year.2024 GuidancePfizer raised its revenue and earnings guidance for 2024 for the second time this year.Adjusted earnings are expected in the range of $2.75 to $2.95 versus the prior expectation of $2.45 to $2.65 per share. This range includes the expected impact of 40 cents dilution from the Seagen acquisition mainly due to the costs of financing the transaction.Pfizer expects total revenues to be in the range of $61.0 to $64.0 billion versus the prior expectation of $59.5 billion to $62.5 billion. The 2024 revenue guidance includes $10.5 billion in potential combined revenues for Paxlovid and Comirnaty, higher than the prior expectation of $8.5 billion due to higher potential revenues from Paxlovid. The $10.5 billion combined guidance comprises $5 billion in sales from Comirnaty and $5.5 billion (previously $3.5 billion) from Paxlovid. Excluding revenues from Comirnaty and Paxlovid but including revenues from Seagen, Pfizer expects total revenues to increase 9% to 11% on an operational basis. The guidance was maintained despite the potential negative impact of Oxbryta withdrawal.Pfizer expects cost cuts and internal restructuring, including layoffs, to deliver savings of $4 billion in 2024. In addition, it expects to generate approximately $1.5 billion in cost savings by the end of 2027 from the first phase of the manufacturing optimization program.Adjusted gross margin is expected to be in the mid-70% range in 2024. Research and development expense is expected to be in the range of $11.0 to $12.0 billion in 2024 (maintained). SI&A spending is expected in the range of $13.8 billion to $14.8 billion (maintained). The adjusted tax rate is expected to be approximately 13% in 2024 (maintained).Comments on Starboard’s AccusationsStarboard, an activist investor in Pfizer’s stock, recently called the company’s board of directors to take action against Pfizer management for failure to earn sustainable profitability despite cost cuts, new product launches and acquisitions. The strong third-quarter performance has somewhat put the criticism to rest, at least for the time being. Addressing this issue, CEO Albert Bourla, on the third-quarter conference call, said that though they agree on some points raised by Starboard, they disagree on some others. Like Starboard, Pfizer management is also unsatisfied with the stock’s return to shareholders. However, management believes that some deals made by the company, like the Seagen acquisition or the Comirnaty deal with BioNTech, have been transformational for Pfizer. Bourla also said that Pfizer has been improving its performance.Pipeline UpdateOn the conference call, Pfizer discussed two new pipeline candidates, an oral small module GIPR antagonist for obesity, which is expected to enter phase II development by end of 2024 and a 25-valent pneumococcal vaccine which is in phase II.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in fresh estimates.The consensus estimate has shifted -28.19% due to these changes.VGM ScoresAt this time, Pfizer has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Pfizer has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. 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