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Argus downgrades Pfizer, lowers earnings estimates on 'near-term headwinds'

Published 03/22/2024, 09:46 PM
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PFE
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Argus Research analysts downgraded Pfizer (NYSE:PFE) stock from Buy to Hold on Thursday, citing “near-term headwinds” the drugmaker faces to revenue growth.

The company forecasts revenue growth of 3% to 5%, excluding COVID-19 products and the Seagen acquisition, a decrease from 7% in 2023. The expected drop in COVID-related revenue will lead to lower gross and operating margins, analysts noted.

Further, Pfizer will need to offset the revenue decline from products losing patent protection and exclusivity between 2025 and 2030. This entails making up for approximately $17 billion in annual revenue at peak from these products facing loss of exclusivity (LOE).

“While the stock has a 6.1% dividend yield, we also note the balance sheet is not as robust as it was a year ago,” the analysts said.

“The debt/equity ratio was 80.8% at the end of 2023, compared to 37.5% a year earlier. Total debt increased to $71.9 billion from $35.8 billion a year ago, as Pfizer funded acquisitions,” they highlighted.

Based on the revised guidance, the analysts have lowered their 2024 adjusted earnings per share (EPS) estimate for the company to $2.15 from the previous $3.25.

They have also set a new EPS estimate of $2.70 for 2025 and adjusted the forecast for the five-year EPS growth rate to 7% from the earlier projection of 9%.

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