Pfizer (PFE) Q1 Earnings: Will it Pull Off a Surprise?

Pfizer, Inc. PFE will report first-quarter 2017 earnings on May 2, before market open. Last quarter, the company delivered a negative earnings surprise of 6.0%.

The pharma giant has a mixed record of earnings surprises. The company’s earnings surpassed expectations in two of the last four quarters while missing in the other two, with an average positive surprise of 4.36%.

Pfizer’s shares rose 4% in the past one year compared with an increase of 5.4% for the Zacks classified Large-Cap Pharma industry.

Factors to Consider

New products like Xalkori (lung cancer), Xeljanz (rheumatoid arthritis) and Ibrance (breast cancer) as well as older products like Lyrica (neuropathic pain) should contribute to the top line meaningfully. Also, revenues from the blockbuster prostate cancer drug Xtandi, added to Pfizer’s portfolio following the Sep 2016 Medivation acquisition, should propel U.S. revenues.

Meanwhile, the Hospira acquisition should continue to be an important growth driver as well. Also, Pfizer launched Inflectra, a biosimilar version of Johnson & Johnson JNJ and Merck’s blockbuster drug Remicade in Nov 2016, which should generate more sales in the first quarter of 2017. Also, Eucrisa (crisaborole) topical ointment, added to Pfizer’s portfolio with the Jun 2016 Anacor acquisition, was approved by the FDA in Dec 2016 for the treatment of eczema. The product should also contribute to the top line in the first quarter.

However, Pfizer will continue to face headwinds in the form of loss of exclusivity on key products like Zyvox and Celebrex and the expiration of a few co-promotion agreements, which will continue to hamper top-line growth. Blockbuster drug Enbrel’s sales will continue to be hurt in the quarter due to biosimilar competition. The Prevnar/Prevenar 13 vaccines franchise should also continue to see lower sales.

Meanwhile, the bottom line should be driven by cost savings and share buybacks. However, new product launch expenses and R&D investments are expected to hurt profits.

On the first-quarter call, investor focus is expected to remain on the company’s performance along with that of new products and pipeline progress including biosimilars and immuno-oncology.

In March, Pfizer announced marketing approvals for its RA drug Xeljanz in the EU and China; said that its breast cancer drug Ibrance’s accelerated approval was converted to regular approval and announced accelerated FDA approval for avelumab for the treatment of metastatic Merkel cell carcinoma (MCC), a rare and aggressive form of skin cancer. Though these positive regulatory updates will not have any impact on first-quarter sales, these should add to the top line in later quarters.

Earnings Whispers

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

Zacks ESP: The Earnings ESP is 0.00% as both the Most Accurate estimate as well as the Zacks Consensus Estimate stand at 67 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Pfizer’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

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

Pfizer, Inc. Price and EPS Surprise

 

Pfizer, Inc. Price and EPS Surprise | Pfizer, Inc. Quote

Stocks to Consider

Stocks in the pharma sector that have both a positive ESP and a favorable Zacks Rank are:

Amgen, Inc. AMGN has an Earnings ESP of +2.33% and a Zacks Rank #3. The company is scheduled to release results on Apr 26.

Scheduled to release results on May 2, Gilead Sciences, Inc. GILD has an Earnings ESP of +2.77% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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