Pfizer Earnings: Solid Results Supported by Steady Tracking Toward $4 Billion In Cost Cuts

Key Morningstar Metrics for Pfizer

• Fair Value Estimate: $42.00
• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Pfizer’s Earnings

We are holding steady to our fair value estimate and wide moat rating for Pfizer PFE following first-quarter results that largely matched our expectations. The company is tracking well to meet its goal of $4 billion in cost cuts by the end of 2024, which should improve operating margins. We believe the market is underappreciating the margin expansion based on the cost cuts, and we view Pfizer as undervalued.

Following overinvestment during the pandemic, Pfizer is reducing costs to adapt to the slowing demand for covid-19 products. While we still expect a tail of close to $8 billion annually for Pfizer’s covid vaccine Comirnaty and treatment Paxlovid, this is down from the over $50 billion sold in 2022. Following the cost-cutting, we expect the firm’s operating margin to return to the more typical range of over 30% from before the pandemic.

On the top line, Pfizer posted 11% operational sales growth, excluding the impact of covid. While the Seagen acquisition accounted for close to half of the growth, we expect Pfizer to continue to post mid-single-digit growth through 2025 before patent losses increase. Importantly, the rare-disease drug Vyndaqel (up 66%) is performing well. The drug’s increased entrenchment should bode well ahead of the competitive launch of BridgeBio’s acoramidis, as we expect low drug switching once a patient starts treatment. Cardiovascular drug Eliquis (up 10%) continues to gain share, but we expect intensifying generics to drive declines by 2026. Pneumococcal vaccine Prevnar (up 7%) benefited from the timing of purchases, but we expect pressure to increase as Merck launches a well-positioned competitive vaccine V116 in the adult setting (close to 30% of the market) later this year.

In the pipeline, the phase 3 trial start for the breast cancer drug atirmociclib lets Pfizer extend its entrenchment in this area as its first-generation drug Ibrance (down 7%) faces increasing competition.