Pfizer Stock Vs. AbbVie

Because of its better quality, we believe that Pfizer stock (NYSE: PFE ) is currently a better choice than its industry peer – AbbVie stock . PFE trades at a very low forward multiple of 11x, versus 20x for ABBV, and we think this valuation gap will narrow in Pfizer’s favor in the coming years. Although Pfizer has seen better revenue growth in recent years, AbbVie has more cash. There’s more to the equation, and in the sections below, we discuss why we think Pfizer will outperform AbbVie over the next three years. We compare a number of factors, such as historical revenue growth, returns, and value.

1. AbbVie Stock Is Much Better Than Pfizer

PFE stock has seen little change over the past three years, while ABBV stock has seen a strong 115% gain from $90 in January 2021 to $195. This compares to an increase of about 45% for the S&P 500 over this almost three-year period. However, the changes in these stocks have not changed. The returns for PFE were 67% in 2021, -10% in 2022, and -41% in 2023, while for AbbVie they were 32%, 24%, and 0%, respectively. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that both PFE and ABBV are underperforming the S&P in 2023.

Actually, still beating the S&P 500 – in good times and bad – it has been difficult in recent years for individual stocks; for heavyweights in the Healthcare sector including UNH and JNJ, and even for megacap stars GOOG, TSLA, and MSFT. On the other hand, the Trefis High Quality Portfolio, which consists of a collection of 30 stocks, has it has outperformed the S&P 500 every year at the same time. Why is that? As a group, HQ Portfolio stocks have delivered better returns with less risk against the benchmark index; a significant decrease in the vehicle, as reflected in the performance metrics of the HQ Portfolio.

2. Pfizer has seen good revenue growth

Pfizer’s revenue rose at an annual rate of 25.6% from $41.7 billion in 2020 to $58.5 billion in 2023, as AbbVie’s revenue grows at an average rate of 6.5% from $45.8 billion to $54.3 billion during this period.

Pfizer’s revenue over 2021 and 2022 it increased due to the very high demand for the vaccine and its treatment of Covid-19. But this trend reversed in 2023, and its total sales fell by 42%, amid low demand for the Covid-19 vaccine. Recently, the company has faced increasing competition for its blockbuster vaccine – Prevnar – which saw its sales growth slow to 1.6% last year against 20.2% growth in 2022. On the positive side, strong gains in Vyndaqel and Abrysvo helped overall sales. growth recently. Pfizer is also benefiting from its purchase of Seagen, which is expected to add $10 billion to the company’s top line by 2030, compared to a $3 billion contribution expected by 2024.

AbbVie’s income growth has been fueled by the acquisition of Allergan in 2020. The company is best known for its antibiotic drug – Humira – which is used to treat osteoarthritis and Crohn’s disease, among others . Humira sales rose to $21.2 billion in 2022, before falling 32.2% to $14.4 billion in 2023. This can be attributed to biosimilar competition.

AbbVie, to some extent, could counter the loss of revenue from Humira with market share gains for some of its newer drugs, notably Skyrizi, and Rinvoq. These drugs are used to treat plaque psoriasis and rheumatoid arthritis. For perspective, these two products have collected $ 11.7 billion in 2023, which shows a solid growth of 53% yoy. Sales of its anti-depressant – Vraylar – also rose 35% yoy to $2.8 billion in 2023. For the six-month period ending in June 2024, Skyrizi and Rinvoq continued with a profit of see of the market, and the sale rises by 50% yoy to more than $ 7 billion. .

AbbVie is also targeting inorganic growth. After acquiring Allergan in 2020, it acquired ImmunoGen for $10.1 billion this year, giving it the rights to Elahere – an ovarian cancer treatment – with estimated sales of more than two billion dollars.

Looking ahead, we expect sales for both Pfizer and AbbVie to grow at a mid-single digit rate for the next three years.

3. AbbVie is more profitable

The reported share of Pfizer’s operations has declined since 21.2% in 2020 at 5.7% in 2023, while for AbbVie the contract from 27.8% to 24.9% at this time. Pfizer had restructuring costs and acquisition-related fees related to Seagen measured in its margin. Pfizer is working on a cost-cutting plan, aiming to save $4 billion by the end of this year. This will help the company to increase its online profile.

4. AbbVie’s Fees Are Better Relative to Financial Risk

Looking at financial risk, we believe that AbbVie has an edge over Pfizer. Its own 20% debt as a percentage of equity is less than 41% for Pfizer. Again, it 9% income as a percentage of assets is higher 3% for Pfizer. This means AbbVie has a better credit rating and a bigger cash cushion.

5. The Net of Everything

We see that AbbVie is more profitable and offers less financial risk than Pfizer. Now, looking at prospects, we believe Pfizer is the better option of the two, given its better outlook and value. Pfizer’s second quarter results this year were positive for the company, showing a 3% increase in sales, despite a lower contribution from Covid-19 products. Excluding these products, sales increased by 14%. Additionally, Pfizer’s cost-cutting efforts will boost earnings growth. At its current level, PFE stock trades at 11x forward-looking earnings of $2.62 per adjusted share in 2024. The 11x figure is significantly lower than the stock’s five-year average of 15x the past.

By comparison, at its current level of around $195, AbbVie stock trades at 18x ​​expected 2024 earnings of $10.88 per share. This compares to the average 12x P/E ratio for ABBV seen over the past five years. This means that PFE stock has room to grow, while ABBV stock looks overpriced, in our view.

Although PFE may surpass ABBV in the next three years, it is useful to see if Pfizer peers charge on key metrics. You will find other useful comparisons for companies across industries at Peer Comparison.

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