Bristol Myers Squibb stock (NYSE: BMY) reported its Q2 results last week, with revenue and earnings coming in above ours and the street estimates. However, BMY stock has seen a fall of around 3% in a week, with rising concerns over the drug pricing bill. Despite the marginal decline seen over the last five days, we believe BMY stock is fairly valued, as discussed below.
Bristol Myers Squibb’s revenue of $11.9 billion in Q2 was up 2% y-o-y, and its EPS of $1.93 reflected an 18% growth. This compares with our estimates of $11.5 billion and $1.86, respectively. The revenue growth was led by higher sales of its blockbuster drug Eliquis (up 16% y-o-y), andwith Opdivo and Orencia sales rising 8%.
The company kept its guidance for the full-year 2022 unchanged. It expects total revenue to be around $46.0 billion, including the headwinds from the strengthening dollar, and earnings to be in the range of $7.44 and $7.74 on a per share and adjusted basis.
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Although Bristol Myers Squibb sees continued market share gains for Eliquis and Opdivo, the loss of market exclusivity for Revlimid poses a threat to the top line growth going forward. Revlimid sales were down 22% to $2.5 billion in Q2, a trend expected to continue over the coming quarters.
Bristol Myers Squibb is looking at inorganic growth to expand its pipeline. A couple of months back, it announced plans to acquire Turning Point Therapeutics (TPTX.O) for $4.1 billion in cash. This acquisition will give Bristol Myers Squibb access to a portfolio of promising cancer drugs, primarily Repotrectinib. This is an orally administered tyrosine kinase inhibitor evaluated in clinical trials for advanced non-small cell lung cancer (NSCLC) and NTRK+ advanced solid tumors. Repotrectinib, if approved by the U.S. FDA, is expected to be a blockbuster drug. Also, it would expand its alliance with Immatics to develop multiple allogeneic off-the-shelf TCR-T and CAR-T programs.
Given the recently announced results and outlook, we have updated our model. We expect full-year 2022 revenue to be $46 billion and adjusted earnings to be $7.50, aligning with the company’s provided range.
We estimate Bristol Myers Squibb’s valuation of $78 per share, reflecting only an 8% upside from its current market price near $72, implying that BMY stock is fairly valued. Our valuation is based on a forward P/E ratio of a little over 10x based on our earnings forecast of $7.50 on a per-share basis for full-year 2022. At its current levels, BMY stock is trading under 10x its forward earnings, compared to the last three-year average of 9x. We don’t expect any meaningful change in the P/E multiple, given that the company faces biosimilar competition for Revlimid.
While BMY stock looks fairly valued, it is helpful to see how Bristol Myers Squibb’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis 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 Mednax vs. Penske Automotive.
Despite inflation rising and the Fed raising interest rates, BMY stock has risen 16% this year. But can it drop from here? See how low Bristol Myers Squibb stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||1%||-13%||85%|
|Trefis Multi-Strategy Portfolio||3%||-11%||252%|
 Month-to-date and year-to-date as of 8/5/2022
 Cumulative total returns since the end of 2016