Pfizer’s Valuation Post-4Q17 Earnings

Pfizer (PFE) reported revenue of $13.7 billion in 4Q17, a 1% rise compared to $13.6 billion in 4Q16. Pfizer surpassed Wall Street analysts’ consensus estimate for its EPS (earnings per share) in the quarter, reporting EPS of $0.62 compared to the consensus of $0.56.

Pfizer missed analysts’ consensus estimate for revenue. It reported revenue of ~$13.70 billion compared to the estimate of ~$13.72 billion in 4Q17.

The above chart compares the estimates for EPS and reported EPS for Pfizer since 1Q16.

The PE multiple represents what one share of a company can buy for an equity investor. Pfizer was trading at a forward PE multiple of ~12.2x on March 15, 2018, compared to the industry average of ~15.1x. Its competitors Merck & Co. (MRK), Eli Lilly (LLY), and Bristol-Myers Squibb (BMY) were trading at higher forward PE multiples of 13.0x, 15.7x, and 19.4x, respectively.

On a capital-structure-neutral basis, Pfizer is currently trading at a forward EV-to-EBITDA multiple of ~10.7x as of March 15, 2018, much lower than the industry average of ~12.5x. Merck & Co. is trading at a lower forward EV-to-EBITDA multiple of 10.6x, while Eli Lilly and Bristol-Myers Squibb are trading at forward EV-to-EBITDA multiples of 12.5x and 16.3x, respectively.

The iShares US Pharmaceuticals ETF (IHE) has 8.6% of its total holdings in Pfizer, 7.4% in Merck & Co., 5.4% in Eli Lilly, and 7.0% in Bristol-Myers Squibb.