Barclay Reviews Pfizer's Second Quarter, Maintains $34 Target

Pfizer Inc. (NYSE: PFE) reported 2Q16 results, with the total revenue beating the consensus by 1 percent but U.S. revenue missing the consensus by 2 percent.

Barclays’ Geoff Meacham maintained an Equal-Weight rating on the company, with a price target of $34.

Meacham mentioned that the revenue offset was driven by better International sales, while adding, “Pfizer altered its reporting segments, with the former Innovative Products (now called Innovative Health) coming in $270M or +4 percent above and Established Products (now called Essential Health) missing consensus by -$146M or -2 percent.”

Related Link: It's Normal For Pfizer To Trade Down After Beating Estimates

Although Prevnar sales were meaningfully below expectations for 2Q16, Enbrel and Ibrance performed well.

However, Meacham expects investors to focus on the margins, since the gross margin came in at 76.7 percent, missing the consensus by 189 bps and declining 357 bps sequentially.

In addition, a meaningful portion of margin stability was driven by lower than anticipated operating expenses and tax rate, which also led to the $0.02 EPS beat.

Guidance Unchanged

“Given that the earnings beat was more cost-savings driven and a lack of a 2016 guidance raise, we would expect Pfizer shares to trade sideways ahead of management commentary on the conference call,” the analyst noted.

The company left its revenue and EPS guidance for 2016 unchanged at $51-$53 billion and $2.38-$2.48, respectively.

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