Pfizer’s Near-Term Performance: A Closer Look
As one of the most watched stocks by Zacks.com visitors lately, Pfizer (PFE) is certainly an interesting company to review. With its shares having returned +3% over the past month versus the Zacks S&P 500 composite’s -1.7% change, and the Zacks Large Cap Pharmaceuticals industry losing 6.7% over this period, it’s natural to wonder where the stock might be headed in the near term.
The Power of Earnings Estimate Revisions
At Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else. We believe that the present value of its future stream of earnings is what determines the fair value for its stock. Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account.
When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Pfizer’s Earnings Estimates
For the current quarter, Pfizer is expected to post earnings of $0.48 per share, indicating a change of +380% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.7% over the last 30 days.
The consensus earnings estimate of $2.94 for the current fiscal year indicates a year-over-year change of +59.8%. This estimate has changed +0.2% over the last 30 days.
For the next fiscal year, the consensus earnings estimate of $2.93 indicates a change of -0.3% from what Pfizer is expected to report a year ago. Over the past month, the estimate has changed +0.7%.
The Zacks Rank: A More Conclusive Indicator
With an impressive externally audited track record, our proprietary stock rating tool — the Zacks Rank — is a more conclusive indicator of a stock’s near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #3 (Hold) for Pfizer.
12 Month EPS
The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:
Revenue Growth Forecast
Even though a company’s earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It’s almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company’s potential revenue growth is crucial.
For Pfizer, the consensus sales estimate for the current quarter of $17.48 billion indicates a year-over-year change of +22.7%. For the current and next fiscal years, $63.34 billion and $63.22 billion estimates indicate +8.3% and -0.2% changes, respectively.
Last Reported Results and Surprise History
Pfizer reported revenues of $17.7 billion in the last reported quarter, representing a year-over-year change of +33.8%. EPS of $1.06 for the same period compares with -$0.17 a year ago.
Compared to the Zacks Consensus Estimate of $15.19 billion, the reported revenues represent a surprise of +16.53%. The EPS surprise was +65.62%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company also beat revenue expectations in three out of the last four quarters.
Valuation Metrics
As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.
Pfizer is graded A on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.
Bottom Line
The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about Pfizer. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.
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