For the third day in a row, shares of big pharma bellwether Pfizer (PFE +1.65%) are heading higher -- which is kind of curious. Just last week, Pfizer issued downbeat guidance for the year ahead. But today, analysts at Citigroup put out a note suggesting that Pfizer is lowballing the market and setting itself up to beat earnings in 2024.
Pfizer stock is up 3.1% through 10:50 a.m. ET in response.
NYSE: PFE
Key Data Points
What Pfizer said
On Wednesday last week, Pfizer guided investors on what to expect from it in 2024. With demand for COVID-19-related vaccines and treatment continuing to dwindle, Pfizer predicted sales of Comirnaty (the Pfizer coronavirus vaccine) and Paxlovid (the Pfizer treatment for coronavirus) will total only about $8 billion next year. The company's acquisition of Seagen will add about $3.1 billion worth of oncology sales. But even so, total sales for the year will range from only $58.5 billion to $61.5 billion -- so $60 billion at the midpoint, which works out to about 4% year-over-year growth.
Non-GAAP (adjusted) earnings will range from $2.05 to $2.25 per share. And this is even after cutting $4 billion in annual costs. (Pfizer explained that the cost of acquiring Seagen will subtract about $0.40 per share from the year's profit.)
What Citigroup says about Pfizer
As reported on The Fly today, Citi is putting Pfizer stock on a "90-day catalyst watch," anticipating that sometime in the next three months (i.e., by the time Pfizer comes out with new guidance in its first-quarter earnings report), the pharmaceuticals giant will report news sufficient to raise its guidance -- and its stock price, too.
Citi, you see, thinks Pfizer will earn at least 11% more than the top of the company's published guidance range -- so at least $2.50 per share. Curiously though, that still isn't enough to convince the banker that Pfizer stock is a buy. The analyst only rates Pfizer stock as neutral.
Is that the right call, though? I mean, if Pfizer earns $2.50 per share, and its shares cost less than $28 today, then that works out to a P/E ratio of only 11.2 on the stock. Pfizer's excellent dividend yield of 6.2% is enough to cover half that valuation all on its own. Seems to me, if Pfizer is growing even just 4% or 5% per year -- which it is promising to do next year -- then that more than justifies the valuation on this premier pharmaceuticals play.
Call me an optimist if you will, but after seeing its stock drop by nearly half over the past year, I kind of think Pfizer stock looks like a buy right now.
