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Pfizer (PFE) Ticks Up Ahead of Earnings: What To Expect

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Shares of Pfizer Inc. (PFE - Free Report) ticked up 0.5% during regular hours Monday, the last day of trading before the pharmaceutical giant releases its latest quarterly earnings report. U.S. stocks were down across the board, but the big players in the healthcare industry were up on the day, reflecting optimism going into the firm’s earnings report tomorrow.   

Pfizer shares have gained more than 16% over the past year as the firm’s deep drug pipeline, contribution from acquisitions, cost-cutting efforts, lower tax rates, and share buybacks have continued to pay off. Still, the firm saw unfavorable customer buying patterns for Ibrance and Xeljanz, while generic competition for products such as Pristiq and Lyrica threaten Pfizer’s hold on those respective markets.

A solid earnings report will help ease concerns about these recent trends while also providing a much-needed update on the firm’s upcoming projects. But what should we expect from its soon-to-be-reported quarter? Let’s take a closer look.

Pfizer Inc. Price, Consensus and EPS Surprise

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

Earnings Outlook

Pfizer will release its Q2 fiscal 2018 results before the market opens on Tuesday. Here’s what analysts are expecting, according to our Zacks Consensus Estimates:

Earnings: PFE is projected to report earnings of $0.75 per share, which would represent about 12% growth from the year-ago period.

Estimate Revisions: The firm has seen 2 positive earnings estimate revisions in the past 60 days, with one coming in just the last week. However, it has also seen one downward estimate in the past 30 days. Moreover, estimates for next quarter, the current fiscal year, and next fiscal year have been mostly split.   

Revenue: Consensus estimates have PFE’s Q2 revenue pegged at $13.26 billion. This would mark growth of 2.8% year over year.

Valuation

PFE is trading at 12.7x forward 12-month earnings heading into today’s report. This is a slight discount compared to the “Large Cap Pharma” industry’s average of about 14.8x, and is about in line with what we have come to expect from the firm in recent years.

Over the past year, PFE has traded as high as 14.2x and as low as 11.4x. Its 52-week median earnings multiple is 12.2x.

Bottom Line

For many investors, Pfizer is a solid long-term holding that will continue to be a dominant force for years to come. For others, there may be concerns about the loss of patent exclusivity in multiple drugs, as well as recent setbacks in the firm’s pipeline.

PFE shares are up about 16% over the past year, so some investors may want to realize their gains instead of risking an earnings play. Analyst revision activity for the quarter has been mixed, and PFE has a Zacks Earnings ESP (Expected Surprise Prediction) of -0.45%.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Given the stock’s current Zacks Rank of #3 (Hold), this Earnings ESP value leaves us inconclusive about PFE’s chances at beating estimates going into this afternoon’s report. Regardless, the firm’s sizable market share and overall performance make it a must-watch stock ahead of earnings.

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