Pfizer (PFE) to Report Q3 Earnings: What's in the Cards?

Pfizer, Inc.PFE will report third-quarter 2018 results on Oct 30, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 8.0%.

The pharma giant has a strong record of earnings surprises. The company's earnings surpassed expectations in each of the last four quarters, leading to an average positive surprise of 6.46%.

Pfizer Inc. Price and EPS Surprise

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

Pfizer's shares have risen 17.2% this year so far compared with an increase of 4.9% for the industry .

Factors at Play

Higher sales of Pfizer's key brands, Ibrance, Eliquis and Xeljanz are making up for loss of exclusivity for some products, lower sales of legacy Established Products in developed markets and continued supply shortages in legacy Hospira products.

In the Innovative Health (IH) segment, new products like Xeljanz (rheumatoid arthritis) and Ibrance (breast cancer) as well as older products like Lyrica (neuropathic pain), Chantix (smoking cessation) and Eliquis (blood thinner) should contribute to the top line meaningfully. Prevnar 13/Prevenar 13 revenues are also likely to be strong in the third quarter.

The Zacks Consensus Estimate for sales of Ibrance (worldwide), Xeljanz, Prevnar and Chantix is $1.09 billion, $474 million, $1.52 billion and $268 million, respectively.

As far as Ibrance is concerned, investors will be keen to know if there has been any share erosion as the CDK inhibitors category now includes two competitors - Eli Lilly's Verzenio and Novartis' Kisqali.

Xeljanz received approval for new indications - ulcerative colitis in both Europe and United States and active psoriatic arthritis in Europe this year - which should boost sales of the drug in the third quarter.

Xtandi was approved for the non-metastatic prostate cancer patient population in the United States in July, which should add to consistently increasing alliance revenues from the drug.

However, blockbuster drug Enbrel sales will continue to decline in the quarter due to biosimilar competition in key European markets. The Zacks Consensus Estimate for Enbrel sales is $489 million.

In Essential Health (EH), biosimilars and emerging markets are expected to support sales. However, the loss of exclusivity and associated generic competition for some products, primarily Pristiq and Viagra in the United States and Lyrica in Europe may affect the top line. Moreover, lower revenues from sterile injectables portfolio due to continued legacy Hospira product shortages in the United States will remain an overhang.

The bottom line is likely to be driven by cost savings and share buybacks.

Last month, Pfizer gained FDA approval for a new cancer drug, Vizimpro (dacomitinib), for the first-line treatment of metastatic non-small cell lung cancer (NSCLC) in patients with EGFR activating mutations. Pfizer has three other cancer medicines under FDA's priority review - glasdegib, lorlatinib and talazoparib. Decisions on all these medicines are expected later this year.

Investors will be keen to know the sales plans for dacomitinib on the conference call. We also expect management to provide an update on the initial launch uptake for newly approved oral SGLT-2 inhibitor, Steglatro (ertugliflozin) tablets on the call. Pfizer has a co-marketing deal with Merck MRK for Steglatro and its fixed dose combinations, Segluromet and Steglujan.

Earlier this month, Pfizer announced that its CEO for eight years, Ian Read, will step down from the post, effective January 2019. Pfizer's current chief operating officer ("COO") and company veteran, Albert Bourla will take over as the company's new CEO. We expect numerous questions in Bourla's expansion plans for the company.

What Our Model Indicates

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.

Earnings ESP: Its Earnings ESP is -0.79% as the Most Accurate Estimate is 75 cents while the Zacks Consensus Estimate is pegged higher at 76 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.

Stocks to Consider

Here are some large biotech/drug stocks worth considering per our model. These have the right combination of elements to beat on earnings this time around:

Amgen, Inc. AMGN is slated to announce financial figures on Oct 30. The company has an Earnings ESP of +0.56% and is a Zacks #2 Ranked stock. You can see the complete list of today's Zacks #1 Rank stocks here .

Allergan, plc AGN has an Earnings ESP of +2.89% and a Zacks Rank of 3. The company is scheduled to report third-quarter earnings on Oct 30.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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