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Will Pfizer's (PFE) Earnings Beat Estimates Again in Q1?

We expect Pfizer, Inc. PFE to beat expectations when it reports first-quarter 2018 results on May 1, before market open. Last quarter, the company delivered a positive earnings surprise of 10.71%.

The pharma giant has a strong record of earnings surprises. The company’s earnings surpassed expectations in each of the last four quarters, delivering an average positive surprise of 4.97%.

Pfizer Inc. Price and EPS Surprise

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Pfizer Inc. Price and EPS Surprise | Pfizer Inc. Quote

Pfizer’s shares have risen 2.3% this year so far against a decrease of 4.3% for the industry.

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Factors at Play

In the Innovative Health (IH) segment, new products like Xeljanz (rheumatoid arthritis) and Ibrance (breast cancer) as well as older products like Lyrica (neuropathic pain), Chantix (smoking cessation) and Eliquis (blood thinner) should contribute to the top line meaningfully. The Zacks Consensus Estimate for sales of Ibrance (worldwide), Lyrica (IH), Xeljanz and Chantix are $973 million, $1.19 billion, $396 million and $272 million, respectively.

In the Essential Health (EH), biosimilars and emerging markets are expected to support sales.

However, the loss of exclusivity and associated generic competition for products, primarily Pristiq in the United States will continue to hamper top-line growth.

Blockbuster drug Enbrel sales will continue to decline in the quarter due to biosimilar competition. The Zacks Consensus Estimate for sales of Enbrel is $540 million.

The Prevnar/Prevenar 13 vaccines franchise may continue to see lower sales in United States while lower demand and generic competition should continue to hurt sales of Viagra.

Pfizer is facing supply shortages for products from the legacy Hospira portfolio mainly due to capacity constraints and technical issues. We expect supply shortages will continue to hurt sales. Pfizer expects to cut down the sterile injectable shortages in 2019.

New cancer drugs Bavencio/avelumab, Besponsa/inotuzumab ozogamicin and Mylotarg are likely to contribute to overall sales this time around.

Xeljanz, Sutent and Bosulif were approved for line extensions in the fourth quarter of 2017. All these new products and line extensions are like to boost Q1 sales.

The bottom line is expected to be driven by cost savings and share buybacks.

We also expect management to provide an update on initial launch uptake for Pfizer and partner Merck’s MRK newly approved oral SGLT-2 inhibitor, Steglatro (ertugliflozin) tablets. Apart from being approved as a monotherapy to treat type II diabetes, Steglatro has also been approved for use in combination with metformin under the brand name Segluromet and with Januvia under the brand name, Steglujan.

What Our Model Indicates

Our proven model shows that Pfizer is likely to beat on earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (75 cents) and the Zacks Consensus Estimate (74 cents) is +1.36%. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Pfizer has a Zacks Rank #2. The combination of Pfizer’s Zacks Rank #2 and positive ESP makes us confident of an earnings beat in the upcoming release.

Sell-rated stocks (Zacks Rank #4 or 5), on the other hand, should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some large health care stocks worth considering per our model. These have the right combination of elements to beat on earnings this time around:

Bristol-Myers Squibb Company BMY has an Earnings ESP of +0.82% and a Zacks Rank of 3. The company is scheduled to report first-quarter earnings on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene Corporation CELG is slated to announce financial figures on May 4. The company has an Earnings ESP of +0.63% and is a Zacks #3 Ranked stock.

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