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What Lies in Store for Pfizer (PFE) this Earnings Season?

Pfizer Inc.PFE will be reporting fourth-quarter and full-year 2016 earnings results on Jan 31, before market open. Last quarter, the company delivered a negative earnings surprise of 1.61%.

Nonetheless, the pharma giant has been consistently beating earnings expectations. The company's earnings surpassed expectations in three of the last four quarters, with an average positive surprise of 6.34%.

Pfizer, Inc. Price and EPS Surprise

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

Pfizer's shares rose 1.5% in the past one year as against a decrease of 3.5% for the Zacks classified Large-Cap Pharma industry.

Let's see how things are shaping up for this announcement.

Factors to Consider

While new products like Xalkori, Xeljanz and Ibrance as well as older products like Lyrica should contribute to the top line meaningfully, the bottom line should be driven by cost savings and share buybacks.

Strong clinical data, continued positive patient experience and rising demand are boosting sales of breast cancer drug Ibrance. We expect the trend to continue in the fourth quarter.

Meanwhile, the Hospira acquisition should continue to be an important growth driver as well with sterile injectables, biosimilars and infusion system segments performing well. Though, the impact of Anacor (Jun 2016) and Medivation (Sep 2016) acquisitions was immaterial in the third quarter, we expect them to contribute to sales and profits in the to-be-reported quarter. Also Pfizer launched Inflectra, a biosimilar version of Johnson & Johnson JNJ and Merck's blockbuster drug Remicade in Nov 2016, which should bring in some sales in the fourth quarter.

However, Pfizer will continue to face headwinds in the form of loss of exclusivity on key products and the expiration of a few co-promotion agreements, which will continue to hamper top-line growth. Enbrel sales will continue to decline in the fourth quarter due to biosimilar competition. Meanwhile, seven fewer selling days in the fourth quarter are expected to hurt results.

Moreover, new product launch expenses and R&D investments are expected to hurt profits.

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

In Dec 2016, Eucrisa (crisaborole) topical ointment, added to Pfizer's portfolio with the Jun 2016 Anacor acquisition, was approved by the FDA for the treatment of eczema. We expect the company to update on the commercialization plans for Eucrisa at the conference call.

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 50 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

Some stocks in the pharmaceuticals sector that have both a positive ESP and a favorable Zacks Rank are:

Merck & Co., Inc. MRK is expected to release results on Feb 2. The company has an Earnings ESP of +1.14% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Vertex Pharmaceuticals, Inc. VRTX has an Earnings ESP of +400.0% and a Zacks Rank #3. The company is scheduled to release results on Jan 25.

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Pfizer, Inc. (PFE): Free Stock Analysis Report

Johnson & Johnson (JNJ): Free Stock Analysis Report

Merck & Company, Inc. (MRK): Free Stock Analysis Report

Vertex Pharmaceuticals Incorporated (VRTX): Free Stock Analysis Report

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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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