Pfizer (PFE) vs. Bristol-Myers Squibb (BMY)

The pharmaceutical industry is well positioned for growth due to advanced technologies such as artificial intelligence, the growing need for quality healthcare, the prevalence of chronic diseases, the growing aging population, and the growing demand for new medicines.

Pharmaceutical stocks were investors’ favourites. Constant demand for drugs and therapies makes pharmaceutical companies more resilient to economic cycles. Dividend-paying pharmaceutical stocks have also proven popular with investors because they provide a steady source of income during uncertain economic times and offer substantial growth opportunities.

Pharmaceutical companies have ample opportunities for growth as more drugs are under development. Furthermore, entry into newer geographies and approval of new drugs provide significant growth opportunities.

Their steady growth helps mitigate the impact of inflation and demonstrates confidence in the company’s ability to attract and retain investors even in turbulent economic conditions.

With the incorporation of artificial intelligence, the Internet of Things, and big data analytics, clinical trial timelines and supply chain efficiencies are significantly accelerated and improved. This helps revolutionize drug discovery and development and ensures continuous innovation. The global pharmaceutical market is projected to grow at a CAGR of 6.1% to reach $2.36 trillion by 2030.

With this background in mind, let’s compare two stocks Medical – Pharmaceuticals, Pfizer Inc. (PFE) and Bristol-Myers Squibb Company (BMY), to understand why BMY offers better dividend stability and growth than PFE.

The case for Pfizer Inc Stock

Pfizer Inc. (PFE) discovers, develops, manufactures, markets, distributes and sells biopharmaceutical products in the US, Europe and internationally.

Shares of PFE have fallen 25.2% over the past year, but gained 9.9% over the past month to close the last trading session at $28.88.

On April 29, 2024, PFE and Genmab A/S announced that the FDA approved the supplemental biologics license application for TIVDAK to treat recurrent or metastatic cervical cancer. TIVDAK is the first antibody-drug conjugate with proven overall survival benefit to receive full FDA approval for this condition.

In terms of forward EV/EBIT, PFE trades at 13.20x, 17.6% lower than the industry average of 16.03x. On the other hand, the stock’s EV/Forecast Sales of 3.67x is 5.1% higher than the industry average of 3.49x.

PFE’s trailing 12-month asset turnover ratio of 0.26x is 34.5% lower than the industry average of 0.40x. However, its trailing 12-month EBITDA margin and FCF leverage margin of 17.53% and 6.31% are 202.5% and 398.5% higher than the industry averages of 5.79% and 6.31%, respectively , 1.27%.

Over the past three years, PFE’s revenue has grown at a CAGR of 6%. In contrast, EBITDA declined at a CAGR of 16% over the same period.

PFE has paid dividends to its shareholders for the past 34 years. The annualized dividend of $1.68 per share translates to a dividend yield of 5.82% of the current share price. The four-year average return is 4.06%. Over the past three and five years, PFE’s dividend payouts have grown at CAGRs of 3.4% and 4.6%, respectively.

PFE’s total revenue for the first fiscal quarter ending March 31, 2024 fell 19.5% year-over-year to $14.88 billion. Additionally, adjusted net income attributable to PFE shareholders and earnings per common share were $4.67 billion and $0.82, down 33.6% and 33.3%, respectively, from the quarter the previous year.

Analysts expect PFE’s revenue for the quarter ended June 30, 2024 to rise 2.5% year-over-year to $13.05 billion. Its EPS for the same quarter is expected to fall 32.3% year-over-year to $0.45. The company has beaten consensus EPS estimates in each of the past four quarters.

PFE’s mixed fundamentals are reflected in its POWR ratings. It has an overall rating of C, equivalent to Neutral in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It is graded C for Growth, Value, Momentum, Stability and Quality. Within the Medical – Pharmaceutical industry, PFE is ranked 65 out of 158 stocks. To see PFE’s rating for Sentiment, click here.

The case for Bristol-Myers Squibb Company Stock

Bristol-Myers Squibb Company (BMY) discovers, develops, licenses, manufactures, markets, distributes and sells biopharmaceutical products worldwide.

Shares of BMY fell during the day to close the last trading session at $41.24.

On May 16, 2024, BMY announced that the FDA granted accelerated approval for Breyanzi, a CAR T-cell therapy, to treat adults with relapsed or refractory follicular lymphoma (FL). It is also listed in the National Comprehensive Cancer Network Guidelines for B-cell lymphomas as therapy for relapsed or refractory FL.

In terms of forward price/sales, BMY trades at 1.81x, 49% lower than the industry average of 3.55x. The stock’s forward EV/Sales of 2.84x is 18.5% lower than the industry average of 3.49x.

BMY’s trailing 12 month gross profit margin of 76.03% is 33.3% higher than the industry average of 57.06%. Also, its trailing 12-month EBIT margin and FCF leverage margin of 18.30% and 35.95% are considerably higher than the industry averages of 1.35% and 1.27%, respectively. On the other hand, the 2.67% 12-month Capex/Sales is 26.8% lower than the industry average of 3.65%.

Over the past three and five years, BMY’s revenue has grown at CAGRs of 2.1% and 14.4%, respectively. Similarly, its EBIT has grown at a CAGR of 3.1% over the past three years.

BMY has paid dividends to its shareholders for the past 34 years. The annualized dividend of $2.40 per share translates to a dividend yield of 5.82% of the current share price. The four-year average yield is 3.30%. Over the past three and five years, BMY’s dividend payouts have grown at a CAGR of 7.6% each.

For the first fiscal quarter ending March 31, 2024, BMY’s total revenue rose 4.7% year-over-year to $11.87 billion. Its non-GAAP gross profit rose 1.5% from the year-ago quarter to $8.96 billion. As of March 31, 2024, BMY’s total assets stood at $99.03 billion, compared to $95.16 billion as of December 31, 2023.

The Street expects BMY’s EPS for the quarter ending June 30, 2024 to decline 3.8% year-over-year to $1.68. Its revenue for the same quarter is expected to grow 2.4% year-over-year to $11.50 billion. BMY has beaten EPS Street and revenue estimates in three of the last four quarters, which is impressive.

BMY’s robust outlook is reflected in its POWR ratings. It has an overall rating of A, equivalent to a Strong Buy in our proprietary rating system.

BMY is graded A for value and B for growth. It ranks 10th in the same industry. Click here to see BMY’s momentum, stability, sentiment and quality ratings.

PFE vs. BMY: Which pharma stocks offer better dividend stability and growth?

The pharmaceutical industry is poised to witness strong growth due to increasing integration of advanced technologies, sustained demand for quality healthcare, growing demand for precision medicine, and higher investment in research and development. Both PFE and BMY are well positioned to capitalize on these positive industry trends.

Despite PFE’s low beta and solid dividend payout history, BMY’s strong financials, solid dividend yields, consistent dividend payouts, impressive growth track record, and low valuation make it a better investment choice than PFE.

Our research shows that the chances of success increase when investing in stocks with an overall rating of Buy or Strong Buy. See here all the top actions in the medical – pharmaceutical industry.

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PFE stock was trading at $28.29 per share Tuesday morning, down $0.59 (-2.04%). Year-to-date, PFE has gained 1.25%, versus an 11.80% gain in the benchmark S&P 500 over the same period.

About the Author: Neha Panjwani

Right from her school days, Neha harbored a deep fascination for finance, a passion that led her to a career as an investment analyst after completing her Bachelor of Commerce degree. Currently enrolled in the CFA program, Neha is dedicated to further enriching her understanding of investment fundamentals. Neha’s primary focus is to help retail investors discern optimal investment opportunities by diligently evaluating the fundamentals of financial instruments with a primary focus on equities and ETFs. Her commitment is to empower people to make informed and strategic investment decisions in the dynamic world of finance. More…

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