Analysts Prescribe A Downgrade For Pfizer Stock

Argus has downgraded Pfizer Inc. PFE to Hold from Buy on a weaker outlook, pipeline setbacks and increased competition. Further, the discontinuation of separation plans was also a key reason behind the downgrade, as the brokerage believes the split would have improved business performance and boosted the stock price.

Pfizer reported third-quarter adjusted EPS of $0.61, which came in a penny below Argus' estimate and the consensus forecast. This is the first time since the first quarter 2013, Pfizer has missed the consensus EPS forecast. Revenues of $13.0 billion were in line with the consensus forecast.

Pfizer also plans to halt Phase 3 trials of its cholesterol-lowering drug bococizumab. Bococizumab had been a key part of Pfizer’s pipeline, with estimated peak annual sales of $1.5 billion. In addition, two of Pfizer’s important drugs are set to lose exclusivity next year.

“The removal of competition should boost sales of the Amgen and Regeneron products,” analyst Jacob Kilstein wrote in a note.

Also, Pfizer lowered the high end of its 2016 guidance by $0.05 on costs associated with the cancellation of bococizumab. Pfizer lowered its 2016 adjusted EPS guidance to $2.38–$2.43 from $2.38–$2.48. However, the company raised its revenue forecast to $52 billion–$53 billion from $51 billion–$53 billion, reflecting expected contributions from Medivation.

The analyst sees 2016 revenue of $52.8 billion, but trimmed his 2016 EPS estimate to $2.40 from $2.47, due mainly to the cancellation of the bococizumab trials. Kilstein also slashed his 2017 estimate to $2.57 from $2.65, citing higher costs and increased competition next year.

“We would need to see a significant change in strategy, such as a reconsideration of the separation plan, before placing the stock back on our BUY list,” Kilstein added.

Separately, BMO Capital downgraded Pfizer to Market Perform from Outperform.

At time of writing, shares of Pfizer were down 0.58 percent to $30.89. Kilstein no longer expects Pfizer to achieve its former target price of $39.