Is Pfizer stock a buy now after earnings?

While the COVID-19 pandemic is an increasingly distant memory for most investors, Pfizer (PFE -0.73%) has struggled to overcome record vaccine sales and earnings in 2021 and 2022. Shares are down about 53% from an all-time high as the market wonders if the pharmaceutical giant can find its next blockbuster drug.

The good news is that the company’s latest results have highlighted a return to growth. Sales momentum from several recent product launches supports an upside outlook. Could Pfizer stock — which currently has a compelling dividend yield of 5.8% — make a nice addition to your portfolio right now? Here’s what you need to know.

A solid start to 2024

The challenge for Pfizer right now is to rebuild investor confidence with evidence that its long-term strategy is back on track. Fortunately, the company’s second-quarter earnings (for the period ended June 30) worked to move in that direction. Revenue growth turned positive at 3% year-on-year, but a more impressive 14%, excluding the impact of the declining Comirnaty and Paxlovid COVID-19 programs.

In addition to contributions from Seagen, which Pfizer acquired in late 2023, this quarter’s growth was driven by strong demand for flagship products such as Vyndaqel and Eliquis. Sales of Nurtec as an acute migraine medicine also increased.

A major theme for Pfizer was its drive to drive financial efficiency through cost realignment, with a plan to achieve at least $4 billion in savings by the end of the year. Looks like the effort is paying off. Adjusted earnings per share (EPS) for the second quarter of $0.60 were $0.14, beating the average Wall Street estimate.

That allowed management to raise full-year guidance: Pfizer now expects 2024 adjusted EPS between $2.45 and $2.65, compared to a previous estimate of $2.25. The revenue forecast was also raised to a range of $59.5 billion to $62.5 billion, for growth of 4% through mid-2023.

Image source: Getty Images.

Pfizer’s attractive high dividend yield

The market usually rewards a turnaround story, and Pfizer has all the pieces in place to emerge stronger after a tough few years. The stock’s appeal as an investment opportunity begins with its industry leadership and recognized history of innovation.

What I like about Pfizer is its compelling value, with a forward price-to-earnings (P/E) ratio of just 11 times management’s EPS guidance for 2024. Pfizer also offers one of the highest yields dividend among a similar group of global drugmakers — currently at 5.8 percent, based on its quarterly payout of $0.42 per share. This level is far above names like AbbVie with a yield of 3.3%, GSK at 3.8%, or even Bristol Myers Squibb to 5.1%.

PFE Dividend Yield Data by YCharts.

Takeaway on Pfizer stock

The takeaway from the second-quarter earnings report is that the company is finally turning the page on its volatile post-pandemic era. I think Pfizer stock deserves a buy rating.

Several drug programs, pending clinical trial readouts, are expected by the end of this year, covering weight management, oncology and hematology. These therapeutic candidates could be catalysts for the stock to rise. At the same time, those regulatory decisions are also risks to consider, with any setback in Pfizer’s pipeline likely adding volatility to the stock.

Ultimately, Pfizer appears undervalued given the long-term opportunities in its existing drug portfolio and pipeline. The company’s ability to regain a profitable growth trajectory should be positive for the stock. For investors with a long-term time horizon, Pfizer could be a good choice in the context of a diversified portfolio.