Pfizer (PFE) stock surged Tuesday after the S&P 500 drugmaker reported first-quarter earnings that surpassed Wall Street expectations, thanks to sweeping cost-cutting measures aimed at offsetting revenue pressures.
The pharmaceutical giant said it’s on track to achieve $4.5 billion in net cost savings by the end of 2024. Looking ahead, Pfizer plans to reinvest the savings by adding $500 million in research and development (R&D) spending by the end of 2026 and $1.2 billion in selling, informational, and administrative (SI&A) costs by the end of 2027.
Analysts Say Cost Discipline Is Key
Steve Johns, Global Analyst at Global FinServe, expects cost management to remain a “high focus area for Pfizer” going forward. “It will take time for Pfizer’s pipeline to bear fruit in the face of patent losses on some drugs in the future,” Johns wrote in a note to clients. “But strong cost control combined with a more focused internal structure leads us to an unchanged long-term view.”
Pfizer shares climbed 3.2% to close at $23.80 on Tuesday, moving closer to their 50-day moving average, according to MarketSurge chart analysis.
First Quarter Earnings Top Expectations
Pfizer reported adjusted earnings of 92 cents per share, up 12% from a year ago and well above analysts’ expectations for 67 cents, according to FactSet. The company maintained its full-year earnings outlook of $2.80 to $3.00 per share but now expects results to trend toward the higher end of that range.
“This quarter was a great start for Pfizer to begin ‘blocking and tackling,’” said David Wagner, a portfolio manager at Aptus Capital Advisors. Wagner said he was encouraged by Pfizer’s prioritization of four key R&D engines but cautioned that he wants to see more evidence of success before becoming more bullish on the stock.
Sales Fall Short, But Outlook Holds Steady
Despite the upbeat earnings, first-quarter sales fell 8% year-over-year to $13.72 billion, missing Wall Street’s estimate of $13.92 billion. The shortfall was largely due to changes in Medicare Part D under the Inflation Reduction Act, which Pfizer previously said would create a $1 billion revenue headwind this year.
Daniel Barasa, portfolio manager at Gabelli Funds, said the sales decline was expected and echoed by Pfizer’s previous guidance. “The IRA impact is real, and it’s showing up in the numbers,” he said.
Still, the company reaffirmed its 2024 revenue guidance of $61 billion to $64 billion.
Product Highlights and Pipeline Developments
Sales strength in the quarter came from Covid vaccine Comirnaty — developed with BioNTech (BNTX) — as well as heart disease treatment Vyndaqel, migraine drug Nurtec, and cancer therapies Padcev and Lorbrena.
These gains helped offset lower sales from Covid antiviral Paxlovid, blood thinner Eliquis, anti-inflammatory drug Xeljanz, and breast cancer treatment Ibrance.
Gabelli’s Barasa highlighted Pfizer’s acquisition of Seagen as a potential long-term driver, citing its promising cancer drug candidates. However, he believes acquisitions remain critical to Pfizer’s future.
“I simply don’t see how the company’s fortunes turn around without a significant acquisition,” he noted. “Given the announcement earlier this month to discontinue danuglipron, I expect Pfizer to prioritize M&A opportunities in the obesity drug space.”
The Battle for Obesity Drug Dominance
The market for weight-loss treatments continues to heat up, and investors are watching closely to see which drugmakers will take the lead. With Pfizer dropping its oral GLP-1 candidate danuglipron, the company is under pressure to find a viable contender in the booming obesity drug market — either through internal development or acquisition.
Outlook: Wait-and-See Mode for Investors
Edward Jones analyst John Boylan maintained a buy rating on Pfizer stock but acknowledged near-term caution. “Investors may take a wait-and-see view on how sales unfold throughout the year,” he said.
With a strong balance sheet, aggressive cost-cutting strategy, and a renewed focus on high-value pipeline assets, Pfizer could be positioning itself for a longer-term turnaround — but execution will be key.