Pfizer stock jumped Tuesday after the S&P 500 drugmaker beat Wall Street's first-quarter profit expectations on the back of savvy cost-cutting measures.
The company says it's on track to deliver $4.5 billion of net cost savings by the end of this year. It expects to add an additional $500 million in research and development expenses by the end of 2026 and $1.2 billion in selling, informational and administrative costs by the end of 2027.
Edward Jones analyst John Boylan expects cost-cutting measures to be a "high focus area for Pfizer." The company plans to reinvest the savings back into its pipeline.
"It will take time for Pfizer's pipeline to bear fruit in the face of patent losses on some drugs in the future, but strong cost-control combined with a more focused internal structure leads us to an unchanged long-term view," Boylan said in a client note.
Pfizer stock advanced 3.2%, closing at 23.80. Shares are pushing closer to their 50-day moving average, MarketSurge chart analysis shows.
Pfizer Stock: 'Blocking And Tackling'
The cost-cutting measures led Pfizer to report adjusted earnings of 92 cents per share, up 12% and easily above expectations for 67 cents, according to FactSet. Pfizer kept its outlook, but said earnings are trending toward the higher end of guidance for $2.80 to $3 per share.
David Wagner, a portfolio manager with Aptus Capital Advisors, is becoming more constructive on Pfizer stock. This quarter was a great start for Pfizer to start "blocking and tackling," he said in an email to Investor's Business Daily.
"I was pleased to see Pfizer's commitment to reducing R&D expenses through prioritizing 4 key R&D engines," he said. "However, I'd wait to see real evidence over the course of 2025 in this strategy being realized & the outcomes of the decisions that are being made, before we can become more positive on the stock."
Analysts are also closely watching sales. First-quarter sales fell 8% to $13.72 billion and missed the Street's forecast for $13.92 billion. This was largely due to changes in Medicare Part D due to the Inflation Reduction Act, according to Daniel Barasa, portfolio manager with Gabelli Funds. He noted Pfizer had previously guided to $1 billion in headwinds this year due to the change.
Edward Jones' Boylan said investors may take a "wait-and-see view on how sales unfold throughout the year." He kept his buy rating on Pfizer stock.
Drugmaker Keeps Its Sales Outlook
Pfizer noted strength from Covid shot Comirnaty — developed with Germany's BioNTech — heart drug Vyndaqel, migraine treatment Nurtec and cancer medicines Padcev and Lorbrena. Those helped offset declining sales of Covid treatment Paxlovid, blood thinner Eliquis, inflammatory treatment Xeljanz and breast cancer drug Ibrance.
The company maintained its sales outlook for the year at $61 billion to $64 billion.
Gabelli's Barasa says there are several assets in Pfizer's pipeline that could eventually become blockbusters, including cancer drug its acquired with Seagen.
"But I simply don't see how the company's fortunes turn around without a significant acquisition," he said in an email. "Given the announcement earlier this month to discontinue danuglipron, I would expect Pfizer to prioritize assets in the obesity space from an M&A perspective."
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