Pfizer Q1 2021 Earnings Report Preview: What to Look For

Pfizer Inc. (PFE), one of the world's largest drug companies, in recent months has sold millions of doses globally of its COVID-19 vaccine, co-developed by Pfizer and BioNTech S.E. (BNTX). The pandemic has created nearly unprecedented demand for the drug, which Pfizer has said will generate $15 billion in sales for the company in 2021, making it one of Pfizer's top-selling products. The Biden administration's goal of vaccinating most of the U.S. population by the end of this summer will further fuel demand for Pfizer's vaccine.

Investors will focus closely on whether Pfizer's vaccine sales can help the company build on last quarter's strong gains in adjusted earnings per share (EPS) and revenue growth when it reports earnings on May 4, 2021, in Q1 FY 2021. The company posted five straight quarters of earnings declines and six of revenue declines before Q4 FY 2020. Now, for Q1, analysts predict that both adjusted EPS and revenue growth will soar YOY after plunging in the same quarter a year earlier. Also, Q1 revenue is expected to rise at triple the pace of Q4 2020.

Investors also will pay close attention to another key metric: Pfizer's COVID-19 vaccine revenue for the quarter. Though there is scant data for comparison because Pfizer's vaccine has only been available for several months, Q1 vaccine revenue could shed light on the company's ability to continue responding to the pandemic quickly and effectively going forward. Analysts predict nearly $2.2 billion in revenue for the company's COVID-19 vaccine, dramatically higher than when it started selling the vaccine in Q4 FY 2020.

Pfizer's stock has struggled in the past year. It was performing approximately in line with the broader market through May of 2020 before plunging in June. It recovered but traded sideways until the final weeks of 2020 as news of the company's coronavirus vaccine and its authorization in the U.S. broke. At this point, shares briefly spiked before drifting downward through early March 2021. Since that time, Pfizer stock has gradually recovered, although it is still significantly underperforming the broader market. Pfizer shares have provided a 1-year trailing total return of 10.7% as compared to 43.6% for the S&P 500.

Pfizer Earnings History

Pfizer suffered five consecutive quarters of YOY adjusted EPS declines beginning in Q3 FY 2019. The hardest-hit quarter in this period was Q4 FY 2019, with a 42.7% YOY decline. Then, as the pandemic accelerated in the first quarters of FY 2020 and shelter-in-place recommendations took effect, demand for new prescriptions and vaccinations took a hit. It was only in Q4 FY 2020, as the company's COVID-19 vaccine gained authorization, that the trend of declining adjusted EPS reversed, climbing by 16.0% YOY. Now, analysts predict that the momentum will pick up, with adjusted EPS rising 21.4% YOY for Q1 FY 2021.

Pfizer's revenue had an even longer period of lackluster performance, with six consecutive quarters of YOY declines beginning in Q2 FY 2019. Q2 FY 2020 saw the largest YOY drop, at 26.2%. Revenue began to grow again along with adjusted EPS in Q4 FY 2020, when it posted 11.8% YOY growth. Consensus estimates show Q1 FY 2021 revenue growing at a much faster rate of 35.3% YOY.

The Key Metric

As mentioned, investors will closely monitor Pfizer's COVID-19 vaccine revenue, which has minimal historical data for comparison. Competitors that have produced COVID-19 vaccines, including AstraZeneca plc and Johnson & Johnson (JNJ), have encountered production or safety problems. As a result, Pfizer's ability to increase vaccine production and revenue could show that it has the potential to secure contracts for future shipments of the vaccine. These contracts are negotiated with governments, who are likely to prepare for future pandemics by securing relationships with one or more suppliers. By establishing itself now as a trustworthy and reliable provider of COVID-19 vaccines, Pfizer could lay the foundation for future, stable growth.

Pfizer began rollout of its COVID-19 vaccine late in 2020, and Q4 FY 2020 earnings reflected the beginning of this process. The company reported $154.0 million in revenue for the vaccine in that quarter. Q1 FY 2021 vaccine revenue is anticipated to be more than 14 times that figure, at $2.2 billion. Analysts currently expect Pfizer's vaccines sales to peak at $2.4 billion in Q2 FY 2021, and then post $1.7 billion in Q3 and $1.8 billion in Q4. It's unclear how much production problems at AstraZeneca plc and Johnson & Johnson will further boost demand for Pfizer's COVID-19 vaccine, and thus its revenue.