Analysts expect Pfizer Inc. (PFE) to report poor financials for the fourth quarter of fiscal 2023, which is scheduled to be unveiled on January 30. Projections indicate a 40.8% year-over-year decline in revenue to $14.38 billion, with a loss per share of $0.18 for the quarter.

That being said, the company grappled with weakened demand for its COVID-19 products, including Paxlovid and Comirnaty, prompting a downward revision of its 2023 guidance in October.

Beyond the fading COVID-19 revenue, the company is confronting challenges in diversifying its growth pipelines. The discontinuation of a weight-loss pill study due to adverse effects underscores these hurdles. Additionally, the company contends with threats from generic competition to its Vyndaqel heart medication.

However, on December 14, 2023, PFE concluded its acquisition of Seagen Inc., bolstering its presence in revolutionary cancer treatments. Seagen's Antibody-Drug Conjugate (ADC) technology, combined with PFE's capabilities, positions the company for significant growth, especially in the critical field of oncology.

The strategic move addresses the persistent challenge of cancer, a leading cause of death, marking a transformative step for PFE. The acquisition is expected to contribute substantially to PFE's near- and long-term financial objectives, establishing a powerful foothold in the evolving landscape of cancer therapeutics.

Shares of PFE have plummeted 38.6% over the past year to close the last trading session at $28.33.

Here are the fundamental aspects of PFE that could influence its performance in the near term:

Bleak Financials

For the fiscal 2023 third quarter, PFE’s revenues decreased 41.5% year-over-year to $13.23 billion. Its loss from continuing operations stood at $2.39 billion, compared to an income of $8.65 billion in the previous year’s quarter.

Moreover, loss attributable to PFE common shareholders and loss per common share amounted to $2.38 billion and $0.42, compared to a net income and EPS of $8.61 billion and $1.51 in the prior year’s period, respectively.

Poor Historical Growth

Over the past five years, PFE’s net income decreased at a CAGR of 15.1%. Its EPS also declined at a 14.3% CAGR. Additionally, the company's levered free cash flow decreased at a CAGR of 18.4% over the same time frame.

Discounted Valuation

In terms of forward non-GAAP P/E, the stock is trading at 17.98x, 4.4% lower than the 18.80x industry average. Its forward EV/Sales of 2.97x is 21.4% lower than the industry average of 3.77x. Furthermore, the stock’s forward Price/Sales of 2.62x, 34.1% lower than the 3.98x industry average.

Optimistic Analyst Estimates for Fiscal 2024

The consensus revenue estimate of $60.50 billion for the fiscal year ending December 2024 indicates a 2.4% year-over-year increase. Likewise, the consensus EPS estimate of $2.22 for the ongoing year exhibits a 45.2% increase from the prior year.

Mixed Profitability

The stock’s trailing-12-month gross profit margin of 68.99% is 21.2% higher than the 56.91% industry average. Its trailing-12-month EBIT margin of 25.82% compares with the 0.09% industry average. However, the stock’s trailing-12-month asset turnover ratio of 0.33x is 15.3% lower than the industry average of 0.39x.

POWR Ratings

PFE’s mixed outlook is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PFE has an A grade for Value, aligning with its lower-than-industry valuation. However, it has a C grade for Quality, reflecting its moderate profitability. The stock also has an F grade for Growth, mirroring the lackluster growth of its financials.

PFE is ranked #71 out of 160 stocks in the Medical - Pharmaceuticals industry. Click here to access PFE’s Momentum, Stability, and Sentiment ratings.

Bottom Line

PFE is currently encountering growth impediments, manifested in subdued demand for COVID-19 products and difficulties diversifying pipelines, underscored by discontinuing a weight-loss pill study due to adverse effects. Recent financial quarter performance and profitability also exhibit shortcomings.

Nevertheless, the company holds potential for long-term gains through strategic acquisitions, coupled with optimistic asset projections for fiscal 2024. In light of this, it could be wise to wait for an opportune entry point into PFE.

How Does Pfizer Inc. (PFE) Stack Up Against Its Peers?

While PFE has an overall grade of C, equating to a Neutral rating, you may check out these other A-rated (Strong Buy) stocks within the Medical - Pharmaceuticals industry: Novo Nordisk A/S (NVO), Novartis AG (NVS) and Santen Pharmaceutical Co., Ltd. (SNPHY). To explore more Medical – Pharmaceuticals stocks, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

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PFE shares rose $0.03 (+0.11%) in premarket trading Monday. Year-to-date, PFE has declined -3.15%, versus a 2.55% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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