I give Pfizer (NYSE:PFE) a buy rating because I believe it will be an excellent defensive recession play for the upcoming economic uncertainty. Pharmaceutical companies are uniquely positioned to weather the storm in times of economic uncertainty. Because of Pfizer's size, it is better prepared than most.
Pfizer is a large pharmaceutical company headquartered in New York City with a market cap of $258 Billion. Since the company was founded in 1849, it has produced numerous drugs on its own and through acquisitions and partnerships. Most recently, the company created a COVID-19 vaccine in collaboration with German biotech company BioNTech (BNTX). To see the immense size of Pfizer, the company states in its Q2 investor presentation that through the first two quarters of 2022, ~854 million people had taken a Pfizer medication or vaccination.
As of this writing, shares traded for $46.03, with an average of 18 million shares traded daily; Pfizer has an EPS of 5.14, creating a low PE of 8.96 and a 3.48% dividend of $1.60. Per the company's last SEC filing, the company had $27.7 billion in revenue, leading to $9.9 billion in net income. Finally, the company had just over $33 billion in cash, cash equivalents, and short-term investments. This pile of cash puts the company in a great financial place to fund its dividend.
Four Reasons That Pfizer Is A Recession Play
The number one most important reason is the sector that Pfizer is in. The health care sector and, more specifically, the pharmaceutical industry is uniquely well suited for performance during a recession. While the pharmaceutical industry, especially a juggernaut the size of Pfizer, will most likely not start achieving massive growth, it will also not likely experience a huge hit to its current growth. Pharmaceutical companies experience consistent demand for their products, and people usually cannot cut back on pharmaceutical-related expenses as much as they can with other companies. For this reason, pharmaceutical companies' underlying businesses are not affected by economic conditions as much.
The second reason is the 3.48% dividend that Pfizer pays. A dividend shows the financial strength a company has. The only time over the last almost 60 years that Pfizer has had a significant cut to its dividend was during the 2008 crisis. Strong leadership has consistently allowed Pfizer to pay dividends to investors during different economic conditions.
The third reason is Pfizer's immense drug pipeline. Outside of the many high-earning drugs that Pfizer currently has, including Paxlovid earning $8.1 Billion a year, Comirnaty earning $8.8 Billion a year, Eliquis earning $1.7 billion a year, Prevnar earning $1.4 Billion a year, and Vyndamax earning $552 million a year, Pfizer still has or will have 12 pivotal data readouts this year. The picture below from the company's second-quarter presentation does not even include any promising partnerships Pfizer has (including in gene editing) or the future money-generating drugs Pfizer could likely acquire.
The fourth and final reason is that Pfizer has an excellent track record of returns. Looking at the chart below, we can see that Pfizer has grown 98.23% over the past ten years. This averages out to 9.8% per year. If you add in the roughly 3% dividend Pfizer pays, the company has returned approximately 12% annually for the past ten years without reinvesting the dividend. While past performance is no guarantee of future performance, I feel good about the future considering Pfizer's immense pipeline and proven track record. While unseen in the dividend number, what can be seen in the share price growth is from the company returning shareholder's capital through stock buybacks: the company did $9.9 billion in the last three years and $2 Billion in the first two quarters of this year.
Risks & Conclusions
The risk with Pfizer over a long period is that they have to find new drugs to bring to the market consistently. While this can be very difficult, they have managed to do this for over 150 years. Additionally, the pharmaceutical industry is not known for rapid growth, so investors might risk missing out on outsized gains in other higher-growth stocks.
Pharmaceutical companies in general and in our case, Pfizer, are usually great defensive plays for recessions. Pfizer's lack of a cyclical nature and strong cash position has led it to this position. Nobody can predict the future or where inflation and interest rates will be in one or five years. This uncertainty can cause many people worries. If you are worried about the economy, then investing in Pfizer might be a good decision, in my opinion.
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Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Pfizer's highly attractive valuation, rock-solid dividend program, and enormous yield put it at the top of its big pharma peer group. Pharmaceutical companies have a recession-proof business model. The simple reason behind this fact is that people do not choose when they get sick.
The 20 analysts offering 12-month price forecasts for Pfizer Inc have a median target of 44.50, with a high estimate of 75.00 and a low estimate of 35.00. The median estimate represents a +13.83% increase from the last price of 39.10.
PFE holds a better value than 78% of stocks at its current price. Investors who are focused on long-term growth through buy-and-hold investing will find the Valuation Rank especially relevant when allocating their assets. PFE gets a 78 Valuation Rank today.
The financial health and growth prospects of PFE, demonstrate its potential to outperform the market. It currently has a Growth Score of D. Recent price changes and earnings estimate revisions indicate this would be a good stock for momentum investors with a Momentum Score of B.
Pfizer announced on 29 July that it will split off its Upjohn off-patent branded and generics business and merge it with Mylan NV to establish a top generic drug company, with $19bn to $20bn in pro forma 2020 revenues.
As of 2023-05-26, the Intrinsic Value of Pfizer Inc (PFE) is 75.16 USD. This value is based on the model Discounted Cash Flows (Growth Exit 5Y). With the current market price of 37.60 USD, the upside of Pfizer Inc is 99.9%.
InvestorsObserver gives Pfizer Inc. (PFE) a strong valuation score of 77 from its analysis. The proprietary scoring system considers the underlying health of a company by analyzing its stock price, earnings, and growth rate. PFE currently holds a better value than 77% of stocks based on these metrics.
Pfizer price started in 2023 at $51.24. Today, Pfizer traded at $38.37, so the price decreased by -25% from the beginning of the year. The forecasted Pfizer price at the end of 2023 is $39.44 - and the year to year change -23%. The rise from today to year-end: +3%.
Historical dividend payout and yield for Pfizer (PFE) since 1989. The current TTM dividend payout for Pfizer (PFE) as of June 05, 2023 is $1.64. The current dividend yield for Pfizer as of June 05, 2023 is 4.28%.
Here's another: a strong dividend profile. Pfizer offers a current yield of 3.56%, much higher than the S&P 500's 1.82%. Its cash payout ratio of 31% leaves plenty of room for dividend increases. The drugmaker has hiked its payouts by 25% in the past five years, a time frame that includes the worst pandemic years.
The Vanguard Group, Inc. is currently the largest shareholder, with 8.9% of shares outstanding. With 7.8% and 5.7% of the shares outstanding respectively, BlackRock, Inc. and Capital Research and Management Company are the second and third largest shareholders.
What investments should you avoid during a recession?
High-yield bonds. Your first instinct might be to let go of all your stocks and move into bonds, but high-yield bonds can be particularly risky during a recession. ...
Utilities. Gas and electricity that people need for transport and homes are always in demand. This makes them solid stock choices for a recession-proof portfolio.
We estimate Pfizer's Valuation to be $56 per share, a significant 45% above the current market price of $39. At its current levels, PFE stock is trading at a 12x forward earnings forecast of $3.35 on a per-share and adjusted basis for the full-year 2023, aligning with its last four-year average.
(NYSE: PFE) today announced that its board of directors declared a $0.41 second-quarter 2023 dividend on the company's common stock, payable June 9, 2023, to holders of the Common Stock of record at the close of business on May 12, 2023.
Pfizer spun off its Upjohn unit which immediately merged with Mylan to form Viatris, effective November 16, 2020 in a transaction meant to be tax-free to Pfizer shareholders. Viatris began normal trading on November 16, 2020.
Effectiveness started to decline after 2 months and decreased to 66.6% (95% CI, 65.2 to 67.8) at 7 months. For the mRNA-1273 two-dose regimen, vaccine effectiveness reached a peak level of 95.9% (95% CI, 95.5 to 96.2) at 2 months.
This settlement came out to $2.3 billion as a result of the false promotion of Bextra Valdecoxib Tablets, Geodon Capsules, Lyrica Pregabalin, and Zyvox.
Total debt on the balance sheet as of December 2022 : $34.87 B. According to Pfizer's latest financial reports the company's total debt is $34.87 B. A company's total debt is the sum of all current and non-current debts.
Introduction: My name is Nicola Considine CPA, I am a determined, witty, powerful, brainy, open, smiling, proud person who loves writing and wants to share my knowledge and understanding with you.
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