On an otherwise down day for the market, Pfizer Inc. (PFE) is flying high. Shares of the pharmaceutical giant are rising after it beat first-quarter sales and earnings projections. This is a big deal, because PFE was one of last year’s biggest disappointments in the healthcare sector. PFE has since been clawing its way back from its mid-February lows.
Is today’s earnings report a sign that it’s finally safe to buy PFE again? Let’s find out.
It’s easy to see why Pfizer’s first-quarter results have sparked fresh buying pressure for the stock. Last quarter, the company’s bottom line grew 27% to $3.02 billion, or 49 cents per share. Adjusted earnings were 67 cents per share, which beat the 55 cents per share consensus EPS estimate by 21.8%.
Meanwhile, Pfizer’s top line improved 20% to $13.01 billion. This outpaced the $12.02 billion consensus estimate by 8.2%. Pfizer’s earlier $15 billion Hospira acquisition, plus better foreign currency exchange rates, boosted the company’s top line.
Pleased with these results, Pfizer lifted its sales and earnings view for FY 2016. The company now expects to earn between $2.38 and $2.48 per share, on $51 billion to $53 billion in revenue. This is above the Street view of $2.30 EPS on $51.24 billion in revenue.
Between these results, and its 3.7% annual dividend yield, it seems like a no brainer that I’d recommend the stock. I must also mention that Pfizer is in the process of buying back $5 billion of its stock.
However, I wouldn’t go rushing out to buy PFE stock just yet. While Pfizer hit a home run with its first-quarter report, analysts are betting that this was the company’s strongest quarter. For the next few quarters, analysts are expecting sales and earnings growth in the mid-single digits.
And, if you remember back to a few weeks ago, Pfizer suffered a major setback when new regulations unraveled its merger with Allergan plc Ordinary Shares (AGN). The $160 billion deal would have grown Pfizer’s portfolio substantially, and resulted in $1 billion in tax savings each year.
So, when it comes to growth opportunities, there are better options than Pfizer, which barely squeaks by with a C-rating in Portfolio Grader. And I can’t even recommend it for its dividend, because between dividend trend, reliability and growth, PFE earns a D in Dividend Grader.
The bottom line is that while today’s quarterly report was good, it wasn’t enough to convince me that PFE will be the next big comeback story. Instead, if you’re really interested in a company that’s experiencing a sustainable comeback, I recently featured my top “tennis ball” stock here.
