Pfizer (PFE), a big name in the pharmaceutical industry and a member of the S&P 500 Index ($SPX), has been grabbing some positive attention lately. After a lengthy period of post-COVID underperformance, this dividend stalwart is showing signs of a comeback that's catching the eye of value-minded investors.
The company recently reported positive results from a late-stage trial of its gene therapy for hemophilia A, adding to the bullish buzz around its progress with an oral obesity drug. These breakthroughs have helped to push Pfizer's stock up nearly 22% from its late-April lows.
And for income-focused investors, Pfizer's impressive 5.46% dividend yield is hard to ignore, especially with its decade-plus history of consistent growth.
As Pfizer prepares to report earnings ahead of the opening bell on Tuesday, July 30, let's dive deeper into why this dividend stock might be a great buy as it begins to move higher off its lows.
Pfizer Stock: Finally Finding Bottom?
Valued at $174 billion, Pfizer Inc. (PFE) is a global biopharma giant that develops, manufactures, and sells a wide range of drug treatments to promote health and prevent disease. The company operates through two main segments: Biopharma and Business Innovation, focusing on primary care, specialty care, and oncology treatments.
Pfizer's stock has underperformed as the company's massive revenue boost from COVID-related products has flagged, but signs of a rebound are emerging. After a tough 2023, with the stock dropping around 44%, PFE is now sporting a YTD gain of more than 6%.
In fact, following its recent burst higher, the drug stock is technically overbought heading into tomorrow's earnings report, which means investors should be prepared to see some potential short-term profit-taking emerge after PFE's results.
PFE Earnings on Deck
In the first quarter of 2024, Pfizer reported revenues of $14.9 billion, down 19% year-over-year due to the expected decline in Comirnaty and Paxlovid revenues. However, excluding these COVID-19 products, revenues grew 11% operationally, showing the strength of Pfizer's core business. The company also reported adjusted diluted EPS of $0.82, including a $0.11 boost from a final revenue adjustment related to Paxlovid.
Pfizer stuck to its full-year 2024 revenue guidance of $58.5 to $61.5 billion, with about $8 billion expected to come from Comirnaty and Paxlovid. However, the bottom line forecast got a boost; Pfizer hiked its adjusted diluted EPS guidance to a range between $2.15 and $2.35, with the pharma giant on track for at least $4 billion in net cost savings by the end of the year.
In Tuesday's report, Wall Street is looking for a profit of $0.45 per share on an adjusted basis, with revenue expected at $13.02 billion, on average.
Is PFE Undervalued?
In terms of valuation, Pfizer looks cheap here, at a forward P/E ratio of 12.91. That's a healthy 38% discount to the healthcare sector median valuation of 21.04, and down sharply from PFE's own trailing 12-month P/E ratio of 21.67.
When it comes to dividends, Pfizer keeps showing its commitment to rewarding shareholders. The company announced a $0.42 dividend for Q3 2024, marking the 343rd quarter in a row. With a current dividend yield of 5.46%, Pfizer offers a solid income stream for investors, backed by over a decade of consistent growth, a strong balance sheet, and a promising pipeline.
As noted, the technically overbought stock could be volatile right after earnings, so investors will want to proceed with caution in the immediate hours and days ahead - but based on these valuations, PFE looks like a good buy.
Checking in on Pfizer's Pipeline
As noted above, Pfizer has been making big moves with its innovative treatments. Along with its recent, crucial wins on its oral obesity and hemophilia A treatments, the European Commission recently gave Pfizer the green light for DURVEQTIX, a gene therapy for severe hemophilia B. This game-changer lets patients produce factor IX themselves with just one dose, potentially revolutionizing the standard of care and cutting down on frequent infusions.
Separately, the FDA fully approved TIVDAK for the treatment of recurrent or metastatic cervical cancer, adding to Pfizer's oncology lineup. Along with a potential GLP-1 market entry, these breakthroughs could drive future revenue growth and further boost Pfizer's market position.
What's the Analyst Forecast for Pfizer?
Analysts are generally feeling good about Pfizer. Out of 21 analysts in coverage, the overall consensus is a “moderate buy.”
Breaking it down, eight say it's a “strong buy,” one calls it a “moderate buy,” and 12 suggest a “hold.” The average target price for Pfizer is $33.68, which is about 9.6% above Monday's close.
One standout opinion comes from BMO Capital analyst Evan Seigerman, who reiterated an "outperform" on the stock earlier this month, largely on the stock's non-COVID potential.
Institutional investors seem to be on the same page, with notable holdings in Pfizer stock. As of July 2024, institutional investors owned a hefty 68.36% of Pfizer's shares, which is a fairly healthy majority stake.
The Bottom Line on Pfizer Stock
In a nutshell, Pfizer's recent breakthroughs in gene therapy, weight-loss, and oncology, coupled with its compelling valuation and attractive dividend yield, make it a standout choice for value-minded investors. Despite post-pandemic challenges, the stock's recent bounce off the lows, strong fundamentals, and promising pipeline suggest the path forward should be higher over the long haul.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
