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Will Pfizer (PFE) Keep the Earnings Streak Alive in Q4?

Arpita Dutt
Updated

Pharma giant, Pfizer PFE is scheduled to report its fourth-quarter 2015 earnings results on Feb 2, before the opening bell. Pfizer’s performance has been pretty good with the company beating earnings expectations consistently. The average earnings beat over the last four quarters is 7.84%.

In the last reported quarter, Pfizer had posted a positive earnings surprise of 17.65%. Let’s see how things are shaping up for this announcement.

Generics & Currency Remain Headwinds, Hospira Provides Support

While Pfizer will continue to face headwinds like genericization, unfavorable currency movement and the expiration of a few co-promotion agreements, the Hospira acquisition will provide some support.

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With the Hospira acquisition, Pfizer has significantly expanded its sterile injectable and biosimilar capabilities. The acquisition has provided Pfizer with Hospira’s lucrative biosimilar portfolio of both marketed and pipeline assets.

On an analyst call, Pfizer had mentioned that it sees the biosimilars market growing from about $2 billion to $20 billion by the end of the decade. The company also expects sterile injectables to grow from around $35 billion to $70 billion by the end of the decade.

Meanwhile, currency, which impacted Pfizer’s third-quarter 2015 revenues by about 9% ($1.1 billion), will continue to affect fourth quarter results.

Pfizer has been struggling to deliver top-line growth in the face of genericization of key products. Products like Celebrex, Lipitor, Norvasc, Protonix, Camptosar and Zoloft are all facing declining sales due to generic competition.

Alliance revenues are also under pressure with the expiry of collaboration for products like Enbrel. In such a scenario, the performance of core products like Lyrica, Enbrel and the Prevnar franchise and new products like Eliquis, Xeljanz, and Xalkori along with the company’s pipeline progress including biosimilars and immuno-oncology will be in focus.

In addition, investor focus will remain on the sales ramp up of newly launched cancer treatment, Ibrance, given its strong continued uptake among physicians and the company’s label expansion efforts.

Meanwhile, Pfizer has already returned $11.4 billion to shareholders through dividends and share repurchases, including a $5 billion accelerated share repurchase agreement announced in Feb 2015. Pfizer’s target is to return approximately $13 billion to shareholders through dividends and share repurchases in 2015. Focus will also remain on details regarding the company’s proposed combination with Allergan plc AGN.

Earnings Whispers?

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

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% since the Most Accurate estimate is in line with the Zacks Consensus Estimate of 52 cents per share.

Zacks Rank: Pfizer carries a Zacks Rank #3. Pfizer’s Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.

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

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Merck & Co. Inc. MRK has an Earnings ESP of +1.10% and carries a Zacks Rank #3. It is scheduled to report fourth-quarter results on Feb 3.

The Earnings ESP for Acorda Therapeutics, Inc. ACOR is +150.00% and it carries a Zacks Rank #2. The company is scheduled to release fourth-quarter results on Feb 11.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


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PFIZER INC (PFE): Free Stock Analysis Report
 
ALLERGAN PLC (AGN): Free Stock Analysis Report
 
MERCK & CO INC (MRK): Free Stock Analysis Report
 
ACORDA THERAPT (ACOR): Free Stock Analysis Report
 
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