Is now the time to buy Pfizer (Pfizer Stock Quote, Chart, News NYSE:PFE)?
The pharma giant was rallying successfully before it hit a roadblock with its latest quarterly earnings, leaving investors wondering whether this pullback is the event they’ve been looking for.
Portfolio manager Paul Harris says that although drug developing is a tough racket, Pfizer’s a solid bet.
Pfizer had been on a strong uptrend since the stock took a nosedive last July, climbing 20 per cent between last August and late last month when the company released its fourth quarter financials. The results were received poorly by the market, however, taking the stock as much as seven per cent last week, a considerable move for a dividend-paying Dow component like Pfizer.
The Q4 revenue of $12.7 billion came in line with analysts’ estimates but nonetheless represented a 9.2 per cent year-over-year decline. Pfizer suffered a net loss for the quarter of $337-million compared to a loss of $394-million a year earlier, with adjusted earnings working out to be $0.55 per share compared to analysts’ average forecast of $0.57 per share.
The company is in the middle of a major transition, which could be adding to market skittishness around the stock, as Pfizer plans to sell off its generic drug business under the Upjohn brand to Mylan NV while redoubling its efforts on becoming research-focused developer of therapies for cancer and rare diseases.
In the quarterly commentary, Pfizer CEO Dr. Albert Bourla said that while 2019 was a busy year featuring solid financial performance and the strengthening of the company’s pipeline, the new year should be transformational.
“2020 is expected to be an exciting year for Pfizer with the close of the Upjohn-Mylan transaction anticipated by mid-year, leaving New Pfizer positioned to deliver revenue and Adjusted diluted EPS growth that is expected to be among the industry leaders. New Pfizer will be a smaller, science-based company with a singular focus on innovation while also continuing to allocate significant capital directly to shareholders, primarily through dividends,” Dr. Bourla wrote.
But while heading into the unknown is never an easy move for investors, Harris, partner at Harris Douglas Asset Management, says that with Pfizer’s dividend looking safe, the stock is likely a solid long-term hold.
“Pfizer is a pharmaceutical company with a great dividend of almost four per cent and it trades at 14x or 15x earnings,” Harris said in a conversation with BNN Bloomberg on Thursday.
“One of the issues I keep coming back to about these kinds of stocks is that I think they’ll have a difficult time going into an election period and I think that the problem with these kinds of pharmaceutical companies is that they’re looking for big drugs all the time so it’s a much more difficult business because of that,” he says.
“But I think that Pfizer should do well over a long period of time. You’ve got a nice dividend and it’ll probably stay relatively where it is,” Harris said.
For its fiscal 2020, Pfizer management has guided for revenue of between $40.7 billion and $42.3 billion for the new company once the Upjohn spinoff occurs. (All figures in US dollars.)