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Can Bristol-Myers Squibb Co Turn Things Around With Q3 Earnings?

Friday, October 21, 2016 8:33
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BMY logoFrom Zacks Research: Pharma giant Bristol-Myers Squibb Co (NYSE:BMY) has seen its stock fall precipitiously this year. Will next week’s report help the company rebound?

BMY is scheduled to report third-quarter 2016 results on Oct 27, before the market opens. Last quarter, the company posted a positive earnings surprise of 2.99%.

Bristol-Myers has an impressive earnings track record so far. The company’s earnings surpassed expectations in each of the four trailing quarters, with an average positive surprise of 15.56%. Will Bristol-Myers be able to beat estimates this time around as well? Let’s see how things are shaping up for this quarter.

Factors to Consider This Quarter

Bristol-Myers’ high-profile immuno-oncology drug, Opdivo, continues to demonstrate robust performance globally driven by strong demand. Opdivo sales in the U.S. are being driven by the lung cancer and renal cell carcinoma indications. In the melanoma indication, robust performance of the Opdivo+Yervoy (Bristol-Myers’ other immuno-oncology drug) regimen is contributing to growth of both the products. Securing reimbursement for the combination regimen across Europe should further aid revenues. Meanwhile, international sales of Yervoy are expected to be under pressure due to competition from PD-1 agents.

Another oncology drug, Sprycel, should continue to keep up its performance in the third quarter of 2016. Meanwhile, multiple myeloma drug, Empliciti’s initial sales have been encouraging despite stiff competition.

Anticoagulant Eliquis’ performance should continue to accelerate. It is well on its way to become the number one novel anticoagulant globally on the back of strong demand trends from key markets globally. Rheumatoid arthritis drug, Orencia, should also contribute significantly to the company’s top line on the back of high demand.

With key products performing well, Bristol-Myers raised its 2016 earnings guidance, primarily for Opdivo and Eliquis, at the time of announcing second-quarter 2016 results. For 2016, the company expects earnings in the range of $2.55 to $2.65 per share (old guidance: $2.50 to $2.60 per share).

Bristol-Myers expects the HIV and HCV franchises to remain under competitive pressure.

During the third quarter, Bristol-Myers remained active on the deal-making and acquisition front in the immuno-oncology space. It collaborated with companies like Johnson & Johnson (JNJFree Report) and AbbVie Inc. (ABBVFree Report) for the evaluation of Opdivo in combination with their cancer treatments.

On the expense front, while marketing, selling and administrative expenses are expected to decrease in the low single-digit range, research and development expenses will increase in the mid-teen range in 2016 due to investments in Opdivo and the immuno-oncology programs.

Despite Opdivo’s success in treating certain types of cancer, it has failed multiple times at demonstrating value for lung cancer patients, which has dropped BMY’s share price considerably.

On the third-quarter call, investors are expected to focus on the company’s performance and label expansion efforts, along with updates on business development activities.

Earnings Whispers

Our proven model does not conclusively show that Bristol-Myers is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, that is not the case here, as elaborated below.

Zacks ESP: The Earnings ESP for Bristol-Myers is +3.08% since the Most Accurate Estimate stands at 67 cents, higher than the Zacks Consensus Estimate of 65 cents.

Zacks Rank: Bristol-Myers carries a Zacks Rank #4 (Sell). As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

BRISTOL-MYERS Price and EPS Surprise


BMY shares fell $0.12 (-0.24%) to $50.24 in Friday morning trading. Year-to-date, BMY has plunged 27%, versus a 4.71% gain in the benchmark S&P 500 index during the same period.

This article is brought to you courtesy of Zacks Research.

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