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Is a Beat in Store for Bristol-Myers (BMY) in Q1 Earnings?

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We expect Bristol-Myers Squibb Company BMY to beat expectations when it reports first-quarter 2018 results on Apr 26, before market open.

Bristol-Myers’ shares have decreased 16.5% so far this year compared with the industry’s decline of 4.7%.

Bristol-Myers’ track record has been mixed so far. The company delivered positive earnings surprise in three of the last four quarters and missed expectations once. The average positive earnings surprise in the last four quarters is 4.23%. In the last reported quarter, Bristol-Myers delivered a positive surprise of 1.49%.

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

 What Will Drive Growth in Q1?

Bristol-Myers’ blockbuster immuno-oncology drug, Opdivo is expected to remain the main sales driver in the first quarter, following several line extensions in 2017. In the soon-to-be reported quarter, the company announced encouraging results from a phase III study evaluating Opdivo in first-line non-small cell lung cancer. Opdivo in combination with Yervoy significantly improved progression free survival in patients compared to chemotherapy. A potential approval in this indication will be a significant boost for the drug, given the immense scope in the lung cancer market. The Zacks Consensus Estimate for the drug’s sales in the first quarter is pegged at $1.38 billion.

In January 2018, the European Commission approved the label expansion of Yervoy injection in pediatric patients 12 years of age and older with unresectable or metastatic melanoma. The FDA approved the drug for this indication in July 2017. The Zacks Consensus Estimate for the drug’s sales in this quarter is $291 million.

In November 2017, the FDA approved line extension of Sprycel in pediatric patients with Ph+ chronic myeloid leukemia in chronic phase. The drug, which registered growth of 6.7% in the previous quarter, is expected to receive a boost this quarter due to the expanded label. The Zacks Consensus Estimate for Sprycel sales stands at $507 million. Cardiovascular drug, Eliquis, came up with a strong performance in 2017, with sales growing 44% year over year. Sales are expected to remain robust in the first quarter too. The Zacks Consensus Estimate for Eliquis sales is pegged at $1.43 billion.

On the other hand, the decline in Hepatitis C franchise is expected to continue due to intense competition from multiple drugs including Epclusa as its label was expanded to include HIV co-infection in August. Moreover, the HIV business continues to face competitive pressure. Recent launches by other companies in the same space are expected to further impact the Sustiva franchise. The Zacks Consensus Estimate for Hepatitis C franchise sales is pegged at $52 million this quarter, down 67.9% from the year-ago quarter actual figure.

Conclusion

Several label expansions of Bristol-Myers’ blockbuster cancer drug, Opdivo, drove the company’s sales last year and are expected do so this year as well. Moreover, cardiovascular drug, Eliquis, also demonstrated strong performance in 2017. We expect this trend to continue this quarter. Label expansion of leukemia drug, Sprycel, approved in November 2017, should bring in more sales for the drug. Moreover, continued strong performance of Yervoy and Orencia will have a favorable impact.

However, genericization of Plavix, Avapro/Avalide and Baraclude in the United States due to loss of exclusivity is significantly hurting the company’s top line. The company also faces stiff competition in the immuno-oncology space. The HIV business continues to face competitive pressure.

The Zacks Consensus Estimate for sales and earnings for Q1 is pegged at $5.17 billion and 84 cents, respectively.

Why a Likely Positive Surprise?

Our proven model indicates 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.

Zacks ESP:Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.82%. This is a leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank:Bristol-Myers has a Zacks Rank #3. The combination of a positive Earnings ESP and a favorable Zacks Rank makes us reasonably confident of an earnings beat.

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

Bristol-Myers Squibb Company Price and EPS Surprise

 

Bristol-Myers Squibb Company Price and EPS Surprise | Bristol-Myers Squibb Company Quote

Other Stocks to Consider

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

Pfizer Inc. PFE is scheduled to release its results on May 1. The company has an Earnings ESP of +1.36% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AbbVie Inc. ABBV is scheduled to release its results on Apr 26. The company has an Earnings ESP of +0.06% and a Zacks Rank #3.

Gilead Sciences, Inc. GILD is scheduled to release its results on May 1. The company has an Earnings ESP of +0.32% and a Zacks Rank #2.

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