Take a look at Pfizer (PFE) . Not flashy. Not solely reliant upon Covid, though treatment and vaccination have been revenue drivers.
Trades at less than eight times forward looking earnings. Yields 3.2%. The Health Care sector SPDR (XLV) gave up 1.73% over the past year, good enough for fourth place among the 11 sector SPDR ETFs. Within that sector, the Dow Jones US Pharmaceutical Index actually gained 5.49% in 2022. Pfizer gave up 13% in 2022 but is up 23.8% since mid-October.
Earnings
Pfizer is set to report the firm's fourth quarter results in very late January. Currently, Wall Street sees adjusted EPS of $1.08 on revenue of $24.4B. This would amount to flat earnings growth and 2% revenue growth from the year ago comp. For the third quarter, reported on November 1st, Pfizer posted adjusted EPS of $1.78 on revenue of $22.6B. The firm beat the Wall Street's expectations for both the top and bottom lines.
The firm divides its Global Biopharmaceutical Business into three categories. Primary Care drove $15.846B in revenue during the third quarter. This business consists of internal medicine, and vaccine product portfolios to include mRNA based products. Specialty Care drove $3.404 in revenue. This is the former Inflammation & Immunology, rare disease and hospital product portfolios. Lastly, we have Oncology, which is self-explanatory and drove $3.07B in revenue for the period.
The firm expects that once Q4 is in the books that Comirnaty (The mRNA-based Covid vaccine) will have driven revenue of roughly $34B for the year by itself, while Covid therapeutic Paxlovid will have driven revenue of about $22B.
Fundies
Pfizer has remained a free cash flow beast, producing operating cash flow of $5.974B during the third quarter and more than $26B in operating cash flow for the trailing 12 months. Free cash flow comes to more than $23B over the past 12 months or about $4.17 per share.
As of October, Pfizer had a net cash position of $36.132B and current assets of $70.403B. This included $9.513B in inventories. Current liabilities added up to $44.314B, putting the firm's current ratio at 1.59 and the firm's quick ratio at 1.37. This is healthy.
Total assets amounted to $195.35B including $77.592B in "goodwill" and other intangibles. At 40% of total assets that's a bit much for my liking. However, this does not impact the firm's current situation. Total liabilities less equity comes to $102.46B including $32.959B in long-term debt. Even including $1.474B in short-term borrowings, Pfizer has enough cash on hand to wipe out the firm's entire debt-load out of pocket. We like that.
My Thoughts
This is not a growth play. Beyond that, I think I have demonstrated a stock that is certainly not overvalued. In addition, Pfizer is fundamentally sound and has no problem generating free cash flow. The firm uses that free cash flow to return cash to shareholders. In addition, the share price is relatively stable. Having closed at $51.33 on Thursday evening, PFE has not traded above $56.32 in 11 months, nor below $41.45 in 14 months.
Interestingly, for regular readers, this chart looks a lot like the chart of Coca-Cola (KO) that I showed you in this morning's Market Recon. I did a double-take just to make sure that I did not somehow transpose one chart upon the other. I did not. But... both names are defensive in nature as one tough year passes on to what might be another very uncertain period, and I am long both names.
Readers will see a mature cup with handle pattern with a $55 pivot. Upon building the handle, the share price has found support at the 21 day EMA (exponential moving average). Now, with a golden cross in place, I see the potential for the share price to make a run at pivot. Relative strength is better than neutral, while the daily MACD (Moving Average Convergence Divergence) oscillator is admittedly not in a good place.
My target price is $65. My panic point would be $47 which would be a failure of both the 50 and 200 day SMAs (simple moving average) to hold.
