Pfizer(US:PFE) Jin Rong Jie·2025-08-04 07:05Core Viewpoint - Pfizer is at a critical juncture as it approaches the release of its Q2 earnings on August 5, 2025, with analysts expecting an EPS of $0.58 and revenue of $13.78 billion, reflecting a 3.3% decline in profit year-over-year and a 3.7% increase in revenue, indicating a delicate balance between growth momentum and structural pressures [1] Financial Performance - Over the past four quarters, Pfizer's average earnings have exceeded expectations by 43.49%, with the most recent quarter showing a 43.75% surprise, driven by cost control measures and strong demand for niche products like Vyndaqel and Padcev [1] - Analysts have slightly lowered EPS expectations by $0.23, reflecting concerns over pricing pressures from the Inflation Reduction Act (IRA) and weakened competitiveness of core products like Ibrance and Xeljanz [1] - The probability of exceeding earnings expectations this quarter is +1.43%, but historical data shows that such surprises have led to average returns of -0.90%, -2.13%, and -2.76% over 3, 10, and 30 days post-announcement, respectively, with a 41.67% success rate indicating that market expectations may have already been priced in [1] Revenue Structure - The oncology segment is a growth driver, with Padcev and Lorbrena performing well, and the acquisition of Seagen continuing to yield synergies; Padcev's consensus forecast is $494 million, closely aligning with model predictions of $499.2 million [2] - Vyndaqel is expected to exceed $1.6 billion in sales, while the primary care sector faces headwinds, with Prevnar sales projected to decline to $1.36 billion and Eliquis under pressure from IRA pricing restrictions [2] - Comirnaty vaccine sales are expected to reach $193 million due to international demand, but Paxlovid's outlook is weakening as infection rates decline [2] Valuation Insights - Pfizer's current P/E ratio of 17.49 is at a 12% discount to its ten-year average of 19.82, appearing attractive; however, compared to the pharmaceutical industry average P/E of 25.27 and peers like Eli Lilly, Johnson & Johnson, and Novartis, Pfizer's valuation advantage is not significant [2] - A five-year EBITDA growth rate of -2.60% raises concerns about growth potential, leading to a lack of PEG ratio, highlighting fundamental growth issues [2] - The 7.32% dividend yield is appealing to income-focused investors, but a 123.62% payout ratio suggests that dividend payments exceed earnings, raising questions about long-term sustainability [2] Short-term Strategy - Zacks ranks Pfizer at 3 (Hold), with a +1.43% probability of exceeding earnings expectations and a historical surprise rate above 43%, supporting a pre-earnings report positioning [3] - Long-term concerns include potential IRA pricing pressures on U.S. market profitability, delays in the R&D pipeline affecting the transition from older drugs like Ibrance, and the risk of dividend adjustments due to high payout ratios amid declining earnings [3] - Overall, Pfizer's Q2 earnings report is seen as a significant short-term trading catalyst, with historical performance and low valuations providing a basis for buying; however, long-term value realization depends on breakthroughs in the innovation pipeline and improvements in profit margins [3]