Pfizer Inc. (NYSE:PFE)

The financial data reveals notable fluctuations in leverage and coverage ratios over the five-year period. The analysis focuses on trends in debt-related ratios and coverage metrics, highlighting shifts in the company's financial structure and risk profile.

Debt to Equity Ratio

The debt to equity ratio exhibits a downward trend from 0.63 in 2020 to a low of 0.37 in 2022, suggesting a reduction in leverage relative to shareholders' equity during this interval. However, this ratio then reverses direction, increasing sharply to 0.81 in 2023 before slightly decreasing to 0.73 in 2024. When including operating lease liabilities, the pattern remains consistent with marginally higher values, indicating lease obligations contribute modestly to overall leverage.

Debt to Capital Ratio

This ratio mirrors the debt to equity trend, declining from 0.39 in 2020 to 0.27 in 2022, implying reduced reliance on debt financing within the company's capital structure. Following this, a pronounced increase to 0.45 in 2023 is observed, with a slight decline to 0.42 in 2024. Including operating lease liabilities results in slightly increased ratios but maintains the same overall pattern, signifying the impact of lease obligations on capital composition.

Debt to Assets Ratio

The debt to assets ratio decreases steadily from 0.26 in 2020 to 0.18 in 2022, indicating a lower proportion of debt financing against total assets. Similar to other leverage measures, this ratio rises significantly to 0.32 in 2023, followed by a decrease to 0.30 in 2024. Including operating lease liabilities raises these figures slightly, consistent with previous observations.

Financial Leverage

The financial leverage ratio declines from 2.44 in 2020 to 2.06 in 2022, reflecting a reduction in the overall use of debt relative to equity. Nevertheless, the ratio jumps to 2.54 in 2023 and slightly decreases to 2.42 in 2024, aligning with the debt ratios' patterns and indicating increased leveraging in the most recent years.

Interest Coverage Ratio

This ratio demonstrates substantial variability. It markedly improves from 6.17 in 2020 to a peak of 29.05 in 2022, suggesting the company had a strong ability to meet interest obligations during this period. However, the ratio then plummets to 1.48 in 2023, implying reduced earnings relative to interest expense, before recovering slightly to 3.6 in 2024. This sharp decline in 2023 could signal increased interest expenses, decreased earnings, or a combination thereof.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio follows a pattern similar to interest coverage. It increases from 4.98 in 2020 to 18.79 in 2022, indicating improved capacity to cover fixed financial obligations. This ratio then falls drastically to 1.34 in 2023 and improves marginally to 3.13 in 2024, highlighting potential operational or financing challenges during the latter years, affecting the ability to service fixed charges.

Overall, the data reflects a period of deleveraging up to 2022, followed by a reversal with increased leverage in subsequent years. The sharp decline in coverage ratios in 2023 suggests tighter financial conditions or operational pressures. Although there is some recovery in 2024, the coverage ratios remain significantly lower than their peak levels. These trends recommend careful monitoring of debt levels and coverage capacity to manage financial risk effectively.

Total Debt

The total debt experienced a generally declining trend from 2020 through 2022, decreasing from 39,836 million USD to 35,829 million USD. However, in 2023, there was a significant increase to 71,888 million USD, almost doubling the previous year's amount. In 2024, total debt decreased somewhat to 64,351 million USD, but remained substantially higher compared to the levels from 2020 to 2022.

Total Shareholders' Equity

The shareholders' equity showed consistent growth from 2020 to 2022, rising from 63,238 million USD to 95,661 million USD, indicating strengthening equity capital. However, in 2023, equity slightly declined to 89,014 million USD and saw a marginal further decrease to 88,203 million USD in 2024, suggesting stabilization but a slight downward adjustment after the previous growth period.

Debt to Equity Ratio

The debt to equity ratio declined steadily from 0.63 in 2020 to 0.37 in 2022, reflecting a favorable reduction in leverage and potentially a stronger equity base relative to debt. In 2023, the ratio increased sharply to 0.81, consistent with the significant rise in total debt experienced that year, indicating heightened financial leverage risk. In 2024, the ratio decreased slightly to 0.73, still maintaining a higher leverage level compared to the earlier years.

Overall Analysis

The company's financial leverage was reduced steadily until 2022, supported by decreasing debt and increasing equity. However, an abrupt increase in debt in 2023 markedly altered this trend, leading to elevated leverage levels despite a relatively stable shareholders' equity base afterward. This shift in capital structure suggests increased reliance on debt financing in recent years, which could impact financial risk and cost of capital moving forward.

Total Debt (Including Operating Lease Liability)

The total debt remained relatively stable from 2020 through 2022, ranging between approximately 39 billion and 41 billion US dollars. However, there was a significant increase in 2023, with total debt reaching over 75 billion US dollars, followed by a decrease to roughly 67 billion US dollars in 2024. This suggests a considerable rise in leverage during 2023, potentially linked to increased financing activities or acquisitions, and a partial reduction of debt in the following year.

Total Shareholders' Equity

Shareholders’ equity exhibited a generally upward trend from 2020 to 2022, increasing from approximately 63 billion to nearly 96 billion US dollars. There was a decline observed in 2023 and a slight further decrease in 2024, with equity figures falling to around 89 billion and 88 billion US dollars respectively. This downward movement after 2022 might indicate distributions to shareholders, losses, or other equity reductions during these years.

Debt to Equity Ratio (Including Operating Lease Liability)

The debt to equity ratio decreased steadily from 0.65 in 2020 to a low of 0.41 in 2022, reflecting a strengthening equity base relative to debt and potentially a stronger financial structure. However, in 2023, this ratio increased sharply to 0.84, consistent with the large rise in total debt and the simultaneous decrease in shareholders’ equity. The ratio then decreased slightly to 0.76 in 2024, indicating some deleveraging but maintaining a higher proportion of debt compared to equity than in prior years.

Total Debt

The total debt exhibited a downward trend from 2020 to 2022, declining from approximately $39.8 billion to $35.8 billion. However, a significant increase occurred in 2023, with total debt nearly doubling to $71.9 billion. In 2024, there was a slight reduction to $64.4 billion, but the debt level remained substantially higher than in the earlier years.

Total Capital

Total capital demonstrated a consistent upward trajectory from 2020 through 2023, increasing from about $103.1 billion to $160.9 billion. In 2024, total capital experienced a moderate decrease to $152.6 billion, though the overall trend over the five-year period reflects growth.

Debt to Capital Ratio

This ratio declined steadily from 0.39 in 2020 to 0.27 in 2022, indicating a reduced reliance on debt relative to total capital. A marked reversal occurred in 2023, as the ratio rose sharply to 0.45, corresponding with the substantial increase in total debt. In 2024, the ratio decreased slightly to 0.42 but remained above earlier period levels, suggesting a higher proportion of debt financing in the capital structure compared to the first three years.

Total Debt (including operating lease liability)

The total debt remained relatively stable from 2020 to 2022, with a slight decrease observed from US$41,271 million in 2020 to US$39,046 million in 2022. However, there was a significant increase in total debt in 2023, rising sharply to US$75,041 million. In 2024, the debt level decreased somewhat but remained elevated at US$66,993 million compared to the earlier years.

Total Capital (including operating lease liability)

Total capital showed a consistent upward trend from 2020 through 2023, growing from US$104,509 million to US$164,055 million. In 2024, total capital declined slightly to US$155,196 million, yet it remained considerably higher than the 2020 base figure. This indicates growth in the company's overall capital base over the period, despite a modest reduction in the final year.

Debt to Capital Ratio (including operating lease liability)

The debt to capital ratio decreased steadily from 0.39 in 2020 to 0.29 in 2022, reflecting a reduction in leverage as total debt fell relative to the growth in total capital. However, in 2023, there was a pronounced increase to 0.46, indicating a notable rise in leverage coinciding with the sharp increase in total debt. In 2024, the ratio declined slightly to 0.43 but remained elevated compared to the initial years, suggesting the company maintained a higher leverage position than its earlier levels.

Total debt

Initially, total debt decreased from 39,836 million US dollars at the end of 2020 to 35,829 million US dollars by the end of 2022, indicating a reduction in leverage during this period. However, a significant increase occurred in 2023, with total debt nearly doubling to 71,888 million US dollars, before declining to 64,351 million US dollars in 2024. This suggests a notable change in financing or capital structure strategy in the latter years.

Total assets

Total assets consistently increased from 154,229 million US dollars in 2020 to a peak of 226,501 million US dollars in 2023, reflecting growth and possibly asset acquisitions or investments. In 2024, total assets decreased somewhat to 213,396 million US dollars but remained higher than the values from 2020 through 2022, indicating sustained asset base expansion despite the slight contraction.

Debt to assets ratio

The debt to assets ratio declined steadily from 0.26 in 2020 to 0.18 in 2022, demonstrating improved solvency and a lower reliance on debt relative to asset size in this period. However, this ratio rose sharply to 0.32 in 2023, correlating with the substantial increase in total debt observed that year. It decreased marginally to 0.30 in 2024 but remained elevated compared to the earlier years, implying higher leverage and possibly increased financial risk relative to the asset base.

Total Debt (including operating lease liability)

The total debt levels remained relatively stable from 2020 through 2022, fluctuating slightly around the 39,000 to 41,000 million USD range. However, a significant increase occurred in 2023, with debt rising sharply to approximately 75,041 million USD. This elevated debt level decreased somewhat in 2024 to about 66,993 million USD, but still remained substantially higher than the values recorded in the earlier years.

Total Assets

Total assets exhibited a steady upward trend over the five-year period. Starting at 154,229 million USD in 2020, assets grew consistently each year, reaching a peak of 226,501 million USD in 2023. A slight decline occurred in 2024 with total assets falling to 213,396 million USD, although this value remains significantly higher than the initial years.

Debt to Assets Ratio (including operating lease liability)

The debt to assets ratio showed a declining trend from 2020 through 2022, decreasing from 0.27 in 2020 to a low of 0.20 in 2022. This indicates improved leverage or less reliance on debt relative to asset size during this period. However, the ratio then increased markedly to 0.33 in 2023, reflecting the sharp rise in total debt that year. In 2024, the ratio slightly improved to 0.31 but remained considerably above the prior years' low levels.

Overall Analysis

The company experienced a period of stable debt and increasing assets from 2020 to 2022, characterized by a declining leverage ratio indicating conservative financial management or asset growth outpacing debt. In 2023, the firm undertook significant additional debt, almost doubling the total liabilities compared to previous years, which led to a marked increase in the debt to assets ratio. This elevated leverage persisted into 2024, despite a moderate reduction in debt and a slight decrease in total assets. The financial trends suggest strategic financial decisions in 2023 possibly linked to expansion, acquisitions, or increased operational financing needs, resulting in higher financial risk compared to the preceding years.

Total assets

The total assets exhibited an overall upward trend from 2020 through 2023, increasing from approximately $154.2 billion to $226.5 billion. However, in 2024, a decline is observed, with total assets decreasing to about $213.4 billion. This suggests significant asset growth over the four-year span followed by a contraction in the most recent year.

Total shareholders’ equity

Shareholders’ equity showed a consistent increase from 2020 through 2022, growing from roughly $63.2 billion to $95.7 billion, indicating enhanced net worth and potential retained earnings growth. In 2023, equity declined to about $89.0 billion and remained nearly stable into 2024 at approximately $88.2 billion. This reversal after 2022 suggests possible distributions, write-downs, or other adjustments affecting equity.

Financial leverage

The financial leverage ratio fluctuated over the period. It began at 2.44 in 2020 and slightly decreased to 2.35 in 2021, followed by a more pronounced reduction to 2.06 in 2022, indicating a lower proportion of total assets financed by debt relative to equity or an increase in equity proportion. The ratio then rose sharply to 2.54 in 2023 before declining again to 2.42 in 2024. These variations imply changing capital structure dynamics, with leverage peaks and troughs likely influenced by financing activities, asset changes, or equity adjustments.

Earnings before interest and tax (EBIT)

The EBIT displayed significant variability over the five-year period. Initially, there was a substantial increase from 8,946 million US dollars in 2020 to 25,602 million in 2021, continuing to 35,967 million in 2022, indicating strong operational performance during these years. However, this was followed by a sharp decline to 3,267 million in 2023, representing a major drop in earnings before interest and tax. In 2024, a recovery trend was observed with EBIT increasing to 11,114 million, although it remained below the peak levels of 2021 and 2022.

Interest expense

Interest expense showed a decreasing trend in the first three years, dropping from 1,449 million US dollars in 2020 to 1,238 million in 2022. This suggests improved cost management or refinancing activities during this period. However, a reversal occurred in 2023 and 2024, with interest expense increasing significantly to 2,209 million and 3,091 million respectively. This rise could indicate higher borrowing costs or increased debt levels in the latter years.

Interest coverage ratio

The interest coverage ratio, measuring the ability to cover interest expenses with EBIT, reflected marked fluctuations corresponding to the changes in EBIT and interest expense. It increased notably from 6.17 times in 2020 to a high of 29.05 times in 2022, indicative of strong earnings relative to interest obligations. Conversely, the ratio plunged sharply to 1.48 times in 2023, signaling potential challenges in meeting interest expenses due to the decline in EBIT. In 2024, the ratio improved to 3.6 times, suggesting partial restoration of coverage but still below earlier peak safety levels.

Earnings before fixed charges and tax (EBIT)

The EBIT shows significant volatility over the observed periods. From 2020 to 2022, there was a strong upward trend, with EBIT increasing sharply from 9,379 million USD to a peak of 36,681 million USD. However, this was followed by a pronounced decline in 2023, dropping to 4,130 million USD, before partially recovering to 11,797 million USD in 2024. This pattern indicates periods of substantial profitability growth interrupted by a sharp contraction, and a moderate rebound afterward.

Fixed Charges

Fixed charges exhibit a steady upward trajectory throughout the period. Starting at 1,882 million USD in 2020, the fixed charges increased gradually to 3,774 million USD by 2024. The increase is consistent, without any decline, suggesting rising obligations in terms of interest or lease costs over time.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio reflects the company's ability to meet fixed charges with its earnings before fixed charges and tax. This ratio increased substantially from 4.98 in 2020 to a high of 18.79 in 2022, corresponding with the growth in EBIT. However, in 2023 it dropped drastically to 1.34, indicating that earnings barely covered fixed charges. The ratio improved in 2024 to 3.13, but remained significantly lower than the earlier peak values. This trend underscores the vulnerability in the company's earnings relative to its fixed obligations during the recent years.