Pfizer Inc. (NYSE:PFE) looks cheap based on its forward P/E, but its earnings outlook helps explain the discount. But unlike Johnson & Johnson or Eli Lilly, Pfizer’s low earnings multiple is not being driven lower by rapid earnings growth. It is expected to rise because earnings are shrinking.
Consensus estimates value Pfizer Inc. at 9.34 times 2026 earnings, 9.60 times 2027 earnings, 11.27 times 2028 earnings, and 12.03 times 2029 earnings. The unusual direction matters: EPS is expected to decline 7.61% in 2026, 2.63% in 2027, 14.84% in 2028, and another 6.33% in 2029.
Whether Pfizer’s steep discount makes it attractive enough to rank among the 10 best healthcare stocks to buy according to hedge funds is worth a closer look.
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Pfizer Is Cheap Because the Earnings Base Is Shrinking
The industry comparison makes that discount easier to understand. Pfizer’s forward diluted EPS growth is negative 2.34%, versus 10.26% for the sector median, while its expected three-to-five-year EPS CAGR is negative 4.80% versus positive 10.03% for the sector.
Patent expirations sit at the center of that problem. Management expects the major loss-of-exclusivity period to culminate around 2028, which helps explain why consensus currently forecasts the steepest earnings decline that year. Management nevertheless expects the business to emerge from that period with high-single-digit revenue growth from year-end 2028 through 2033.
Near-term execution has been stronger than that long-term earnings trajectory suggests. Pfizer Inc. raised the midpoint of 2026 revenue guidance after Q2 to $60.5 billion-$62.5 billion and maintained adjusted EPS guidance of $2.80-$3.00. Eliquis sales increased about 21% to $2.43 billion, while Padcev grew 23% to $667 million.
Cost Cuts Buy Time for the Pipeline
Pfizer Inc. is tackling the earnings problem from both sides.
Management now expects approximately $9.7 billion of total net cost savings through 2029, including additional manufacturing and productivity savings beginning in 2027. The savings can cushion margins as older products decline, but they cannot indefinitely replace revenue lost to patent expirations. Pfizer Inc. is therefore reinvesting part of those efficiencies into its next growth cycle: adjusted R&D spending increased 12% operationally in Q2, driven partly by oncology and obesity programs.
That makes recent pipeline developments relevant to valuation rather than simply clinical milestones. Detailed positive Phase 3 LITFULO data in vitiligo presented on October 2, 2026 and Phase 2 tilrekimig results in atopic dermatitis (reported on October 1, 2026) broaden potential future revenue sources. Metsera gives Pfizer another route into obesity, with monthly GLP-1 candidate berobenatide targeted for a first approval in 2028, precisely when the existing portfolio faces its largest earnings pressure.
The risk is that acquired assets do not deliver enough replacement revenue. Pfizer recorded $4.3 billion of non-cash intangible impairments in Q2 after revising forecasts for pipeline assets, including a setback involving Seagen-acquired sigvotatug vedotin. Seagen’s broader commercial portfolio has nevertheless performed above Pfizer’s initial expectations.
Johnson & Johnson Shows What Pfizer Is Missing
Johnson & Johnson provides a useful contrast. It trades at 23.11 times estimated 2026 earnings, more than twice Pfizer Inc.’s 9.34 times multiple. But investors are paying that premium against a very different expected earnings trajectory. Consensus expects JNJ’s EPS growth to accelerate from 2.66% in 2026 to 9.25% in 2027, and 22.29% in 2028. Pfizer’s EPS, by comparison, is expected to decline 14.84% in 2028.
Johnson & Johnson’s operating performance provides some support for that difference.
Second-quarter sales increased 6.6% to $25.3 billion, prompting Johnson & Johnson to raise its 2026 outlook, while Innovative Medicine operational sales grew 6.8%. Its newer franchises, including TREMFYA, CARVYKTI, RYBREVANT/LAZCLUZE, and CAPLYTA, are helping offset pressure from older products such as STELARA. Johnson & Johnson also expects full-year free cash flow approaching $21 billion, giving it considerable capacity to keep funding its pipeline and MedTech expansion.
Pfizer Inc. faces a harder bridge between today’s portfolio and tomorrow’s earnings. Its cost program can protect margins, and Metsera and Seagen could create meaningful new revenue streams, but those investments must first compensate for the patent expirations already embedded in consensus forecasts. JNJ, by contrast, is being valued on expectations that its replacement products will do more than offset losses and instead accelerate company-wide earnings.
The valuation gap therefore is not simply investors paying too much for Johnson & Johnson and too little for Pfizer. The market is assigning very different values to two different expected earnings paths. Pfizer’s discount becomes more meaningful if its post-2028 growth investments begin changing that trajectory. We examined Johnson & Johnson’s valuation more closely, discussing whether its accelerating earnings outlook can justify the premium investors are paying today.
Hedge funds have yet to signal a broad change in Pfizer’s side of that debate. The number holding Pfizer Inc. remained at 83 in Q2, although Fisher Asset Management increased its position 4% to 109.1 million shares and AQR added 57%. By comparison, JNJ’s hedge fund count increased to 117 from 113, with Fisher increasing its JNJ stake 44% during the quarter. These 13F positions remain backward-looking quarter-end snapshots, but the difference adds another dimension to the contrasting earnings outlooks.
Pfizer’s Low Multiple Needs an Earnings Turnaround to Matter
Pfizer Inc.’s valuation question therefore is not whether 9.34 times earnings looks inexpensive in isolation. It is whether cost savings can protect profitability long enough for Seagen, obesity, and the broader pipeline to replace expiring revenue and reverse the earnings declines currently expected through 2029. Until that trajectory changes, the low multiple itself tells only half the story.
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