Analysts Expect Pfizer (PFE) to Deliver a Blowout Q3

Our preview of the upcoming week's earnings reports includes Pfizer (PFE), Square (SQ) and Moderna (MRNA).

It has been a strong earnings season so far, with about 82% of the S&P 500 companies that have reported so far exceeding analysts' earnings estimates, according to FactSet.

This week promises another jam-packed earnings calendar, with blue-chip pharmaceutical firm Pfizer (PFE, $43.55) among those releasing results.

The Dow Jones stock had a strong start to the year, rallying from its Dec. 31 close at $36.81 to its Aug. 17 record high at $50.42. Helping fuel the shares were strong sales of the company's COVID-19 vaccine – developed alongside BioNTech (BNTX). This was evidenced in PFE's second-quarter results, with vaccine revenues surging 640% year-over-year (YoY) and total revenues up 92% from the year prior. PFE shares climbed more than 3% in response.

Investors are likely hoping for another positive reaction to Pfizer's third-quarter earnings report – slated on the earnings calendar for the morning of Nov. 2 – especially considering the stock is down about 14% from that aforementioned peak.

Analysts are certainly targeting solid growth for Pfizer's September quarter. On average, they're looking for revenues of $22.8 billion and earnings per share (EPS) of $1.09 – both huge improvements over last year's $12.7 billion in sales and 72 cents per share in profits.

"Pfizer is on track to generate strong revenue and operating cash flow in 2021, with a large contribution from its COVID-19 vaccine," says Argus Research analyst David Toung, who has a Buy rating on the stock. "Since the 2Q 2021 earnings report, the company has signed additional contracts for the vaccine, which has also received Food and Drug Administration (FDA) authorization as a booster shot."

And beyond the COVID-19 vaccine, the analyst likes PFE's solid pipeline of biologics, strong research and development (R&D) capabilities, and "innovative" biopharma business, which includes "growth drivers" such as chemotherapy drug Ibrance, blood thinner Eliquis and pneumococcal conjugate vaccine Prevnar 13 among others.

However, Mizuho Securities analysts believe consensus estimates for Pfizer's third quarter are "likely too high." Specifically, they point to prescription trends from healthcare data analysis firm IQVIA and what they believe are likely lower-than-anticipated COVID-19 vaccine sales based on "orders that Pfizer has publicly announced and government websites that track actual COVID vaccine shipments."

Looking past Q3, the analysts – who have a Neutral (Hold) rating on PFE – "expect significant attention on the conference call on how management sees COVID-19 vaccine sales evolving over the next several quarters and management expectations on Pfizer's oral protease inhibitor targeting COVID-19 ahead of top-line data later this quarter." 

The team will also be looking for commentary on "other mid-late stage pipeline assets, as well as Pfizer's business development priorities, as the company works to improve its 2026-2030 outlook."

Analyst: Square Q3 Will Be Soft, But Tailwinds Are Ahead

Square (SQ, $256.20), like so many other stocks, had a volatile, yet positive month of October. The shares rallied about 10% off their early month lows near $233, widening their year-to-date lead to nearly 18%.

The payments processor turned in blowout results in its second quarter – reporting triple-digit percentage growth on both the top and bottom lines from the year prior – but Jefferies analyst Trevor Williams doesn't think a repeat is in store. 

"We expect fewer surprises than in the second quarter as investors brace for soft results after macro-turbulence in August, a deceleration in e-commerce and easing forex tailwinds," he writes in a note. 

Longer term, though, he sees a "favorable setup" into 2022, with Square's acquisition of Australian buy-now, pay-later firm Afterpay expected to close in the first quarter and several new Cash App initiatives. He has a Buy rating on the fintech stock and says bulls "expect any near-term weakness to be short-lived."

Square will report its third-quarter earnings after the Nov. 4 close. Analysts, on average, are expecting $4.5 billion in revenues (+49.6% YoY) and earnings of 39 cents per share, a 14.7% improvement of its year-ago results.

Moderna Earnings Estimates High, But Sentiment Low

Moderna (MRNA, $342.87) is another healthcare stock that hit a record high in August but has since pulled back. The shares are down about 30% from that mid-August peak.

However, even with this pullback, Deutsche Bank analyst Emmanuel Papadakis thinks the shares are still extremely overvalued and has a Sell rating and $250 price target on the stock. As we detailed recently in our free A Step Ahead e-letter, Papadakis sees the COVID-19 vaccine maker's business as being fundamentally sound, but its valuation "looks detached from a problematic assessment of reality."

Needham analyst Joseph Stringer isn't exactly upbeat toward Moderna, either. He has a Hold rating on the shares, "based on our belief that success in COVID vaccine programs is fully reflected in the stock."

As for Moderna's Thursday morning third-quarter earnings report: the pros, on average, are looking for EPS of $9.09 compared to a per share loss of 59 cents in the year-ago period. As for revenues, they're targeting $6.2 billion – a more than 7,944% YoY improvement.

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