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Is a Beat in the Cards for Bristol-Myers (BMY) Q2 Earnings?

Zacks Equity Research

Bristol-Myers Squibb Company BMY is scheduled to report second-quarter 2019 results on Jul 25, before the market opens.

The company’s shares have lost 16.1% in the year so far compared with the industry’s decline of 0.1%.

 

Bristol-Myers delivered average positive earnings surprise of 11.85% in the trailing four quarters. In the last reported quarter, the company delivered a positive surprise of 0.92%.

Bristol-Myers Squibb Company Price, Consensus and EPS Surprise

 

Bristol-Myers Squibb Company Price, Consensus and EPS Surprise

Bristol-Myers Squibb Company price-consensus-eps-surprise-chart | Bristol-Myers Squibb Company Quote

 

Let’s see how things are shaping up for this quarter.

Why a Likely Beat?

Our proven model shows that Bristol-Myers is likely to beat on earnings this quarter. This is because it has two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for the same.

Earnings ESP: Earnings ESP for Bristol-Myers is +0.28%.  You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Bristol-Myers currently carries a Zacks Rank #3, which when combined with a positive ESP makes us confident of an earnings beat.

Note, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Driving Growth

Bristol-Myers’ key immuno-oncology drug, Opdivo, is expected to be the primary revenue driver in the to-be-reported quarter, extending its previous performance. The drug, which is approved for multiple indications, generated sales of $1.8 billion in the first quarter, increasing 19% year over year.

Blood thinner drug, Eliquis, witnessed strong growth (+28%) and became the top revenue generator for the company in the first quarter. We expect the momentum to continue in the second quarter.

Oncology drug, Sprycel, is also maintaining momentum. In January, the FDA approved a label expansion of Sprycel, in combination with chemotherapy, to include pediatric patients aged a year or above with newly diagnosed Philadelphia chromosome-positive (Ph+) acute lymphoblastic leukemia (ALL). The European Commission also approved the drug for the same indication in February. We expect the recent label expansion to boost sales of the drug in the second quarter.

Orencia and Yervoy should also continue their stellar performance in the second quarter. 

However, the Hepatitis C and HIV businesses continue to face competitive pressure. Sales for the franchises are expected to decline.

Concurrent with the first-quarter results, Bristol-Myers reiterated its adjusted earnings and revenue expectations for 2019. The company projects earnings of $4.10-$4.20 per share. The Zacks Consensus Estimate for earnings is pegged at $4.16. It expects worldwide revenues to increase mid-single digits.

The Zacks Consensus Estimate for second-quarter sales and earnings is pegged at $6.03 billion and $1.06, respectively.

Apart from the top- and bottom-line numbers, investors will also focus on pipeline updates on label expansion of drugs. The phase III CheckMate-498 trial evaluating Opdivo plus radiation versus temozolomide plus radiation in patients with newly diagnosed O6-methylguanine-DNA methyltransferase (MGMT)-unmethylated glioblastoma multiforme (GBM) did not meet its primary endpoint of overall survival (OS) at final analysis.

Moreover, CheckMate-459, a randomized phase III study evaluating Opdivo compared to Nexavar as a first-line treatment in patients with unresectable hepatocellular carcinoma (HCC), also did not achieve statistical significance for its primary endpoint of overall survival (OS).

Key Anticipated Updates

Investors will also focus on further updates on the company’s impending acquisition of Celgene Corp. CELG. The acquisition earlier was being opposed by a few large shareholders (Wellington and Starboard) of Bristol-Myers, expressing multiple concerns regarding its growth following the acquisition. The acquisition was finally given a green signal a couple of months back.

Meanwhile, Bristol-Myers needs to sell one of Celgene’s blockbuster drugs, Otezla, to complete the impending merger on a timely basis in light of concerns expressed by the U.S. Federal Trade Commission (FTC). We remind investors that the company has a tyrosine kinase 2 (TYK2) inhibitor, BMS-986165, in its pipeline, which is being evaluated in several autoimmune diseases, including psoriasis.

The regulatory agency was concerned about a possible overlap between Otezla and BMS-986165 in the pipeline. Hence, Bristol-Myers decided to sell Otezla.

Moreover, the company now expects to complete the merger by the end of 2019 or beginning of 2020. The divestiture of the drug also puts a question mark on the targeted synergies and anticipated sales of the combined company, per Bristol-Myers.

Other Stocks to Consider

Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Merck MRK has an Earnings ESP of +0.80% and a Zacks Rank #2. The company is scheduled to release results on Jul 30. You can see the complete list of today’s Zacks #1 Rank stocks here..

Allergan, plc AGN has an Earnings ESP of +3.52% and a Zacks Rank #3.

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