On Tuesday, Pfizer (PFE, Financial) experienced a stock price drop of 1.39% to $28.46, influenced by its third-quarter earnings report and interactions with activist investor Starboard Value. Despite the positive closing of the S&P 500 index with a 0.2% gain, Pfizer's stock movement reflected investor concerns over its recent acquisitions.
Pfizer reported impressive financial results for the third quarter, with a revenue of $17.7 billion, a 32% increase year-over-year. This surge was primarily attributed to robust sales of its Covid treatment, Paxlovid, and the vaccine Comirnaty. Excluding these, the company's revenue growth stood at 14%. The non-GAAP earnings also saw a significant turnaround, posting a profit of over $6 billion compared to a $968 million loss in the previous year. Notably, the company exceeded analyst expectations, which projected sales under $15 billion and adjusted net income of $0.62 per share.
Market sentiment was influenced by CEO Albert Bourla's remarks addressing criticism from Starboard Value. Bourla defended the company's recent acquisitions, countering the activist investor's claims of funds misuse by asserting their transformational value to Pfizer.
Looking ahead, Pfizer has revised its financial guidance for 2024, projecting revenue between $61 billion and $64 billion, with adjusted earnings per share ranging from $2.75 to $2.95. This is an upward revision from the previous guidance of $59.5 billion to $62.5 billion in revenue and $2.45 to $2.65 in earnings per share.
In terms of stock analysis and valuation, Pfizer (PFE, Financial) is currently facing several challenges. The GF Value assessment on GuruFocus considers it to be Fairly Valued. The company's market capitalization stands at approximately $161.27 billion, with a price-to-book (PB) ratio of 1.84, suggesting a decent valuation relative to its book value.
However, there are notable warning signs, including a distressed Altman Z-score of 1.72, indicating a potential risk of financial distress in the next two years, and a high dividend payout ratio of 1.23, which may raise concerns about dividend sustainability. Furthermore, Pfizer's operating margin and gross margin have shown a long-term decline, reflecting challenges in profitability.
On a positive note, the company boasts a strong dividend yield close to a 10-year high, offering investors an attractive return. Additionally, the stock is currently trading near its one-year high, which may attract momentum investors.
Investors should weigh these factors carefully, considering both the opportunities presented by Pfizer's strong revenue growth from its Covid portfolio and the risks associated with its financial metrics and recent strategic decisions.
