Bristol Myers Squibb (NYSE: BMY) is scheduled to report its Q3 2021 results on Wednesday, October 27. We expect the company to likely post revenue and earnings slightly above the consensus estimates, primarily led by continued market share gains for its anticoagulant Eliquis, cancer drugs Opdivo and Yervoy, and rheumatoid arthritis drug Orencia. Overall, Bristol Myers Squibb should see a pickup in demand, due to an increase in hospital visits with Covid-19 vaccination rates going up steadily. We expect the company to navigate well based on these trends over the latest quarter. Furthermore, we also think BMY stock remains attractive at the current levels. Trefis’ forecast indicates that Bristol Myers Squibb’s valuation is around $86 per share, which is 48% above the current market price of around $58. Our interactive dashboard analysis on Bristol Myers Squibb’s Pre-Earnings has additional details.
(1) Revenues expected to be above the consensus estimates
Trefis estimates Bristol Myers Squibb’s Q3 2021 revenues to be around $11.7 billion, slightly above the $11.6 billion consensus estimate. With over half of the U.S. population fully vaccinated, and on the international front the vaccination rate is rising gradually, total procedure volume and hospital visits are on a rise and this should augur well for Bristol Myers Squibb.
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Looking at individual drugs – Eliquis, Opdivo, Yervoy, and Orencia – sales were up (y-o-y) 29%, 16%, 38%, and 9%, respectively, while its top-selling drug – Revlimid – was up 11% to $2.9 billion in Q2 2021. While Eliquis and Orenica will continue to see steady growth led by market share gains, Opdivo’s uptick, of late, is being driven by label expansion, including that for gastric cancer, and this trend is likely to continue in the near term. Furthermore, the U.S. FDA approved the company’s CAR-T treatment – Abecma – in March of this year, and it will also bolster the overall sales growth in Q3. Our dashboard on Bristol Myers Squibb Revenues offers more details on the company’s segments.
2) EPS also likely to be slightly above the consensus estimates
Bristol Myers Squibb’s Q3 2021 adjusted earnings per share (EPS) is expected to be $1.96 per Trefis analysis, compared to $1.92 as per the consensus estimate. Bristol Myers Squibb’s adjusted net income of $4.3 billion in Q2 2021, was up 16% y-0-y, led by higher revenues. As the company sees a rebound in sales, the margins are expected to improve, bolstering the overall earnings growth in 2021. For the full year 2021, we expect the adjusted EPS to be higher at $7.56 compared to $6.44 in 2020. However, there can be near term margin pressure due to inflationary headwinds and supply chain constraints.
(3) Stock price estimate much higher than the current market price
Going by our Bristol Myers Squibb’s Valuation, with an EPS estimate of around $7.56 and a P/E multiple of around 11x in 2021, this translates into a price of $86, which is 48% above the current market price of around $58. The 11x figure is slightly higher than the 10x levels seen as recently as late 2020, but lower than 13x levels seen in late 2018 and 2019.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year.
While BMY stock looks undervalued currently, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Johnson & Johnson vs Regeneron Pharmaceuticals.
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