Insights

100 Billion Reasons to Like This Dominant Healthcare Stock

Picking companies with size and scale on their side tends to be a smart move for investors.
This is because these companies are well established in their respective industries and stand a higher chance than peers of being around in the future. Pfizer (NYSE: PFE) is one example of a mature pharma stock that should do well for investors in the years ahead. Let’s take a look at why.
Image source: Getty Images.

Higher revenue than all but several dozen global economies
Pfizer’s first-quarter earnings results, reported on May 3, were strong enough that it reiterated its revenue and guidance of $100 billion for 2022. If this forecast is proven correct, Pfizer would be the first pharma stock to achieve that monumental feat. For context, if Pfizer were its own country or territory, its gross domestic product would be the 64th largest in the world — ahead of Ethiopia and just behind Puerto Rico.
The company reported $25.7 billion in revenue in the first quarter, which was its first quarter with over $100 billion in annualized sales. This represented an 82% operational growth rate over the year-ago period. Operational growth accounts for patent expirations and the fact that there were fewer selling days in the first quarter than last year.
Pfizer’s COVID-19 vaccine, Comirnaty, which is co-owned with its German partner BioNTech, generated $13.2 billion in revenue for the former in the first quarter. This was a 282.1% year-over-year spike for Pfizer. The company’s recently launched anti-viral COVID treatment, Paxlovid, notched $1.5 billion in revenue during the quarter.
And even without its two COVID products, Pfizer still produced a healthy 5% operational growth rate in the first quarter. This was primarily driven by growth in two drugs. The anti-coagulant medicine named Eliquis, which is co-owned with Bristol Myers Squibb recorded $1.8 billion in revenue for the quarter, resulting in a 9.1% growth rate over the year-ago period. And Pfizer’s rare heart disease drugs Vyndaqel/Vyndamax posted a 35.1% year-over-year growth rate to $612 million in revenue during the first quarter. 
The company hauled in $1.62 in non-GAAP (adjusted) diluted earnings per share in the first quarter, which was a 72% growth rate over the year-ago period. Pfizer’s significantly higher revenue base was only partially offset by a 50-basis-point decline in adjusted net margin to 36.4% and a 1.7% increase in its weighted-average diluted outstanding share count to 5.8 billion shares. 
The payout should keep growing
Pfizer also can provide income investors with a market-topping 3% dividend yield. And with the dividend payout ratio expected to be 25.2% in 2022, the company has plenty of room to grow the dividend. This is why I believe Pfizer will deliver mid-single-digit annual dividend growth over the long run.
Pfizer’s blend of yield and growth potential makes it a potential millionaire-maker stock for investors with time on their side.
A bargain-bin valuation
Even with a dip in earnings expected next year, Pfizer still looks like a dirt-cheap stock. That’s because Pfizer is trading at a forward price-to-earnings ratio of 9.9. This is moderately lower than the industry average of 11.6. And if that wasn’t convincing enough, the company’s price-to-sales ratio of 3.3 is well below its 10-year median of 3.9. 
Kody Kester has positions in Bristol Myers Squibb and Pfizer. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy. –

Picking companies with size and scale on their side tends to be a smart move for investors.

This is because these companies are well established in their respective industries and stand a higher chance than peers of being around in the future. Pfizer (NYSE: PFE) is one example of a mature pharma stock that should do well for investors in the years ahead. Let’s take a look at why.

Image source: Getty Images.

Higher revenue than all but several dozen global economies

Pfizer’s first-quarter earnings results, reported on May 3, were strong enough that it reiterated its revenue and guidance of $100 billion for 2022. If this forecast is proven correct, Pfizer would be the first pharma stock to achieve that monumental feat. For context, if Pfizer were its own country or territory, its gross domestic product would be the 64th largest in the world — ahead of Ethiopia and just behind Puerto Rico.

The company reported $25.7 billion in revenue in the first quarter, which was its first quarter with over $100 billion in annualized sales. This represented an 82% operational growth rate over the year-ago period. Operational growth accounts for patent expirations and the fact that there were fewer selling days in the first quarter than last year.

Pfizer’s COVID-19 vaccine, Comirnaty, which is co-owned with its German partner BioNTech, generated $13.2 billion in revenue for the former in the first quarter. This was a 282.1% year-over-year spike for Pfizer. The company’s recently launched anti-viral COVID treatment, Paxlovid, notched $1.5 billion in revenue during the quarter.

And even without its two COVID products, Pfizer still produced a healthy 5% operational growth rate in the first quarter. This was primarily driven by growth in two drugs. The anti-coagulant medicine named Eliquis, which is co-owned with Bristol Myers Squibb recorded $1.8 billion in revenue for the quarter, resulting in a 9.1% growth rate over the year-ago period. And Pfizer’s rare heart disease drugs Vyndaqel/Vyndamax posted a 35.1% year-over-year growth rate to $612 million in revenue during the first quarter. 

The company hauled in $1.62 in non-GAAP (adjusted) diluted earnings per share in the first quarter, which was a 72% growth rate over the year-ago period. Pfizer’s significantly higher revenue base was only partially offset by a 50-basis-point decline in adjusted net margin to 36.4% and a 1.7% increase in its weighted-average diluted outstanding share count to 5.8 billion shares. 

The payout should keep growing

Pfizer also can provide income investors with a market-topping 3% dividend yield. And with the dividend payout ratio expected to be 25.2% in 2022, the company has plenty of room to grow the dividend. This is why I believe Pfizer will deliver mid-single-digit annual dividend growth over the long run.

Pfizer’s blend of yield and growth potential makes it a potential millionaire-maker stock for investors with time on their side.

A bargain-bin valuation

Even with a dip in earnings expected next year, Pfizer still looks like a dirt-cheap stock. That’s because Pfizer is trading at a forward price-to-earnings ratio of 9.9. This is moderately lower than the industry average of 11.6. And if that wasn’t convincing enough, the company’s price-to-sales ratio of 3.3 is well below its 10-year median of 3.9. 

Kody Kester has positions in Bristol Myers Squibb and Pfizer. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.

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