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$PFE Earnings - Was the Recent Sell-Off Warranted?
$PFE is one of my larger holdings and it has had a pretty significant sell-off sincemid-December.

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I wanted to dig into their most recent earnings report and see if there were any red-flags that support the sell-off.

First, I will start by sharing the first line item from Pfizer's report, "Full-Year 2022 Revenues of $100.3 Billion, An All-Time High for Pfizer, Reflecting 30% Operational Growth". Good start!

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First red flag comes in their second line item - more than half of their 13% revenue growth was driven by their COVID-19 drugs PAXLOVID (anti-viral) and Comirnaty (vaccine). Pfizer has been riding some significant tailwinds from the success of these two drugs, but we cannot (hopefully) rely on these two medications to continue to be growth drivers.

Leadership raised both Full-Year 2023 Revenue and EPS guidance from $67B to $71B and $3.25 to $3.45, respectively. With share price at earnings at $43.55, that is a forward P/E decrease of 13.4 to 12.6. That is a positive for value investors out there.

The report goes on to say that there is currently a large inventory of COVID-19 medications on hand, so sales of PAXLOVID and Comirnaty are expected to decline in 2023. This anticipated decline will force Pfizer management to depend on their other drugs to make up the decline and reach those increased revenue targets. Their answer came on Slide 7 of their presentation:

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Pfizer appears to be banking on the successful launch of RSV vaccines in 2023 to be the primary driver for the next year. Additionally, a Revenue CAGR range of 6 - 10%. Below is Pfizer's 10 year Revenue CAGR, compliments of Koyfin. Prior to the pandemic, their highest CAGR was right around 8% in 2017.

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The 6-10% range seems a little high given their best non-COVID year was 8%. I will be interested to see if this pans out.

In summary, I think the sell-off could have been in anticipation of the known headwinds from the projected reduction in sales from the COVID drugs. I'll set a reminder to check back in next year and see if they hit their 2023 guidance numbers.

What are your thoughts? Do you own or follow Pfizer?

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