Should You Consider Investing in Pfizer Inc. (PFE)?

The pharmaceutical giant Pfizer (PFE) has caught the attention of many investors recently. To better understand the investment potential of this stock, it's important to review the factors that could influence Pfizer's performance in the short term.

Comparing its performance over the past month, Pfizer's shares saw a slight decline of 0.8%, whereas the broader S&P 500 index experienced a modest rise of 0.9%. Within its industry, however, the Large Cap Pharmaceuticals sector, which includes Pfizer, enjoyed a 7.1% gain. Investors are now faced with the critical question: What's the future trajectory for PFE stock?

Many factors can cause a company's stock to become a trending topic, often including significant changes in business prospects. However, it's usually the underlying fundamentals that are critical to long-term investment decisions.

Revisions to Earnings Estimates

An essential approach to evaluating a company is by looking at the revisions of its future earnings projections. At the heart of this analysis is the premise that the present value of a company's expected earnings determines the fair value of its stock.

If analysts increase their earnings estimates for a company, this suggests greater future earnings potential and, consequently, a higher fair value for the stock. If the fair value is higher than the current market price, investors may see an opportunity to buy, which can lead to price appreciation. The relationship between revisions in earnings estimates and stock price movements has been supported by empirical studies, highlighting its significance.

Currently, for its upcoming quarterly report, Pfizer is predicted to post a loss of $0.18 per share, which shows a sharp decline of 115.8% from the same quarter a year ago. The consensus on earnings estimates has seen a modest decrease of 0.8% over the past 30 days.

The forecast for the current fiscal year suggests a significant drop of 76.9% to $1.52 per share, with the estimate revised down by 0.4% recently. For the following fiscal year, the projection stands at $2.22 per share, implying an improvement of 45.9% compared to the expected performance in the current year, although it has seen a 3.8% downward revision over the last month.

Pfizer's Zacks Rank is currently #5 (Strong Sell), a rating that is primarily influenced by recent earnings estimate revisions among other factors.

Revenue Growth Forecast

While earnings are critical, revenue growth also plays an integral part in assessing a company's financial health. Sustained earnings growth is typically contingent on a company's ability to grow its revenues over time.

For Pfizer, the consensus estimate predicts a notable decrease of 41.3% in current quarter sales to $14.26 billion. Forecasts for the current and next fiscal years suggest revenue figures of $58.67 billion and $60.36 billion, representing changes of -41.5% and +2.9%, respectively.

Last Reported Results and Surprise History

In its most recent quarterly report, Pfizer posted a revenue of $13.23 billion, a year-over-year drop of -41.6%, with an EPS of -$0.17 comparing unfavorably with the $1.78 reported in the same period of the previous year. The reported revenue fell short of the consensus estimate of $13.77 billion by -3.93%. However, the EPS exceeded expectations by +46.88%.

Over the last four quarters, Pfizer has consistently surpassed EPS estimates. In terms of revenue, it has outperformed consensus estimates twice during the same period.

Valuation

Evaluating a stock's valuation is crucial to understanding its potential for future performance. It's essential to consider whether its price accurately reflects the intrinsic value of the underlying business and growth prospects.

Comparing the company's current valuation multiples, like price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), with historical values can help determine if the stock is undervalued, overvalued, or fairly valued. Placing the valuation in the context of industry peers offers further insight.

Pfizer's valuation receives a grade of 'C', implying it's trading in line with its industry counterparts.

Despite the factors and data that have been considered, Pfizer's current Zacks Rank as a Strong Sell could indicate potential underperformance relative to the broader market in the near-term future.

Pharmaceuticals, Investing, Stocks