Earnings execution is steady, but the key to re-rating still lies in R&D pipeline delivery

Overview

The report reviews Pfizer Inc.'s 2Q26 earnings call. Quarterly revenue beat expectations mainly due to Eliquis, and other core products were broadly steady, but Paxlovid remained under pressure. The company raised the lower end of FY26 revenue guidance, lowered its COVID-19 revenue outlook, and maintained adjusted EPS guidance. Goldman Sachs believes operating execution and cost-reduction progress are stable, but investor confidence and stock re-rating depend more on subsequent delivery from the R&D pipeline, including mevrometostat, tilrekimig, and the obesity program.

Core views

First, near-term fundamentals are broadly stable: Eliquis and the non-COVID portfolio offset weakness in the COVID business, and the lower end of FY26 revenue guidance was raised, but the upper end was unchanged, indicating that growth quality still needs to be monitored. Second, operating leverage is the main driver of medium-term profit improvement, and the new cost-reduction plan is expected to support margin expansion after 2028. Third, capital allocation is becoming more conservative, with the dividend clearly protected and M&A focused on controllable small-scale bolt-on transactions. Fourth, the R&D pipeline is the core variable for valuation change, among which the 4Q26 phase 3 results for mevrometostat are the most critical; 2H26 obesity program updates are expected to be more incremental, while four pivotal phase 3 studies for tilrekimig may gradually increase market attention.

Analysis framework

The report combines quarterly results with management guidance, major product sales trends, cost programs, capital allocation, and updates on clinical R&D catalysts to adjust revenue and EPS forecasts; valuation uses rolling Q5 to Q8 adjusted EPS multiplied by a 9.0x P/E multiple, and assesses upside and downside scenarios through key pipeline outcomes, cost savings, the vaccine business, and the regulatory environment.

Methodology notes

• Fundamental analysisEarnings and guidance review

  Assess near-term operating trends through revenue, product sales, margins, expenses, and management guidance.

  The report compares 2Q26 actual performance with market expectations and adjusts FY26 forecasts based on Eliquis, the COVID-19 business, and expense trends.

• Valuation analysisForward P/E valuation

  Derive the target price by multiplying rolling forward adjusted EPS by the target P/E multiple.

  Goldman Sachs applies a 9.0x P/E multiple to rolling Q5 to Q8 adjusted EPS, resulting in an unchanged 12-month target price of $26.

• Scenario analysisClinical pipeline catalyst analysis

  Assess the potential impact of key clinical readouts on earnings forecasts, valuation multiples, and investor confidence.

  The report focuses on the trial progress of mevrometostat, the obesity program, and tilrekimig, and notes that mevrometostat results could bring a valuation change in the low-single-digit percentage range.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Pfizer Inc. (PFE.US)

  Core research subject

  Strengths

  Eliquis and multiple core products are performing steadily; the scale of the cost-reduction plan has expanded; the dividend has been clearly protected by management; and the company has multiple late-stage R&D assets that could improve medium- to long-term growth.

  Weaknesses

  The COVID-19 business continues to decline, with Paxlovid significantly below expectations; there is a revenue trough around 2028; current valuation upside is limited, and growth recovery is relatively dependent on pipeline success.

  Comparison

  2Q26 revenue was above market expectations, but was mainly contributed by Eliquis, which the market had already largely anticipated; compared with standard treatment, tilrekimig aims to differentiate itself through higher efficacy and once-monthly dosing.

  Risks

  Late-stage clinical trial failures, deterioration in the vaccine regulatory and commercial environment, continued weakening of COVID demand, tariffs causing a larger impact on lower-gross-margin businesses, and cost savings falling short of expectations.

Key data

• Post-earnings share price performance+1.5%Approximately 210 basis points above the DRG Index, which fell about 0.6% that day.
• FY26 revenue guidance$60.5bn-$62.5bnPreviously $59.5bn-$62.5bn; the lower end of revenue guidance was raised by $1bn.
• FY26 COVID-19 revenue guidance$4bnPreviously $5bn; Goldman Sachs' own forecast was lowered from $4.1bn to approximately $3.6bn.
• FY26 adjusted EPS guidance$2.80-$3.00The company maintained its prior guidance, including absorbing an approximately -$0.10 impact from the Innovent transaction.
• Additional net cost savingsApproximately $2.5bnExpected to be realized from 2027 to 2029, bringing cumulative net savings from related programs to approximately $9.7bn by 2029.
• Goldman Sachs EPS forecasts$2.99/$2.95/$2.49 for 2026/2027/2028Previous forecasts were $2.99/$2.96/$2.57, respectively.
• M&A capacityApproximately $6bn-$7bnManagement stated that future focus will be on small bolt-on transactions in areas such as oncology, inflammation, obesity, and vaccines.
• Target price and valuation multiple$26; 9.0xBoth the 12-month target price and the forward P/E multiple used remain unchanged.
• Phase 3 readout for mevrometostat4Q26Delayed from the previous 2H26 due to slower-than-expected event accumulation, but it remains the most closely watched clinical catalyst for the year.

Impact & implications

Recent earnings and revenue guidance have reduced the risk of a major fundamental downgrade, while the cost program and dividend commitment also help stabilize defensive attributes. However, with the reference share price close to the target price, price upside from cost reduction alone is limited. If mevrometostat or tilrekimig achieves positive results, the market may raise confidence in R&D productivity and post-2028 growth recovery, driving valuation multiple expansion; conversely, setbacks in key pipelines could simultaneously lower long-term earnings forecasts and valuation multiples.

Risks

• If late-stage R&D assets such as mevrometostat experience trial setbacks, long-term earnings forecasts may be lowered and valuation multiples may be further compressed.
• Vaccines account for a relatively high share of revenue, and regulatory policy or commercial demand weaker than expected would put pressure on revenue and market sentiment.
• COVID-19 infection rates and Paxlovid usage may remain below expectations, while Comirnaty sales also have clear seasonality.
• Tariffs may have a greater-than-peer-average impact on Pfizer Inc.'s profits because the company's gross margin is relatively low.
• If the pace or magnitude of additional cost savings falls short of expectations, it would weaken the scope for operating margin expansion after 2028.
• Important efficacy data for the obesity program still need to wait until 2027, with a long development cycle and clinical and competitive risks.

What to watch

• The 4Q26 MEVRO-1 phase 3 readout and its impact on the value of the prostate cancer pipeline.
• Early updates in 2H26 on berobentide and long-acting amylin monotherapy and combination programs, as well as the SOLIS-1 phase 2 study expected to complete in August 2027.
• The start-up progress of four pivotal phase 3 trials for tilrekimig, including a superiority head-to-head study versus Dupixent in atopic dermatitis.
• Whether the FY26 non-COVID portfolio can continue to offset revenue pressure from Paxlovid and Comirnaty.
• Implementation progress of approximately $2.5bn in additional cost savings from 2027 to 2029 and their contribution to margins.
• Execution of dividend policy, small-scale bolt-on M&A arrangements, and whether the selection of a new chief financial officer can be completed by late 2026 or early 2027.