Global Beta Advisors’ Company Profile of Pfizer Inc. (“PFE”)

by Justin Lowry, President & CIO, Global Beta Advisors, LLC

Pfizer recently released its 2nd fiscal quarter results for 2021.  The company beat both top and bottom-line numbers as shown below:

  • Earnings: $1.07 EPS, vs. $0.97 EPS estimated by FactSet.
  • Revenue: $18.98 billion, vs. $18.71 billion estimated by FactSet.

This marks a roughly 60% increase in revenues from the year prior and a roughly 84% increase in earnings from the year prior.  Just as important as the strong quarterly results was the fact that they raised their guidance for the remainder of their fiscal year.  They increased their earnings per share (“EPS”) guidance from $3.55-$3.65 to $3.95-$4.05 on expected revenue between $78-80 billion from $70.50-$72.50 billion.  The increase in guidance seemingly came from the expected increase in demand for its COVID-19 vaccine as more nations seek accessibility, and nations that have vaccinated a lot of their population seek boosters amidst the spread of the new “delta” variant.  This growth rate will further aid an already strong balance sheet, enabling it to continue to pay strong dividends.  While there will eventually be an end to the pandemic and the revenues from COVID-19 vaccine related contracts subside, Pfizer’s statement on its earnings call that it will continue spending on research and development to further invest in MRNA based projects is really encouraging that the company is serious about its growth initiatives beyond the pandemic.

Pfizer Dividends Over the Years

Data from Factset Fundamental from 09/28/18 through 06/30/21.

Because Pfizer is leveraging its financial gain from its COVID-19 MRNA vaccine into expanding their presence within MRNA, Global Beta really likes Pfizer’s growth prospects, particularly when you consider its standing as a strong dividend paying company and its current price to sales multiple.  Even prior to the development of the COVID-19 vaccine, Pfizer had done a good job growing its dividend year over year for the past 3 years.  It has generally been able to sustain a 3.5-4% dividend yield as you can see in the previous chart.

Investors may have pause as to whether Pfizer can continue to grow their dividend and sustain that yield, given their pledge to continue to invest in research and development. However, Pfizer has always done a really good job in maintaining a strong and healthy balance sheet to deliver on its dividends. There has been no indication their dividend will be a casualty in their research and development spend. If Pfizer can continue to position itself as a growing company, it will be in a better position to continue to grow and deliver on its dividend, which is why we like the stock.

What’s even more impressive is that the stock is still cheap, even by recent historical standards. Next is a chart outlining the price to sales of Pfizer in each quarter over the past 3 years:

Pfizer Price-to-Sales Over the Years

Data from Factset Fundamental from 09/28/18 through 06/30/21.

Pfizer’s current price to sales multiple sits just below 4, which is one of the cheapest levels it has seen in the past 3 years.  When you couple its renewed growth prospects with its status as a strong dividend payer and its current price to sales multiple, we believe it provides an excellent opportunity for investors.

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