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Will Bristol-Myers' (BMY) Q4 Earnings Exceed Expectations?

Zacks Equity Research

We expect Bristol-Myers Squibb Company BMY to beat expectations when it reports fourth-quarter 2017 results on Feb 5, before the market opens.

Bristol-Myers’ shares have increased 30.1% in the past year while the industry recorded an increase of 26.6%.

Bristol-Myers’ track record has been mixed so far. The company delivered positive earnings surprise in two of the last four quarters and missed expectations twice. The average positive earnings surprise in the last four quarters is 2.72%. In the last reported quarter, Bristol-Myers delivered a negative surprise of 2.6%.

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

Factors at Play

Bristol-Myers’ blockbuster immuno-oncology drug, Opdivo is expected to continue as the primary sales driver in the fourth quarter. The drug is already approved in multiple cancer indications. In the past two quarters, the drug received approval for five line extensions, which is expected to boost sales. Moreover, in December 2017, Opdivo’s label was expanded as adjuvant therapy for completely resected melanoma.

The FDA’s approval of Merck’s MRK Keytruda in May for the first-line treatment of metastatic non-squamous NSCLC had a lower-than-expected impact on third-quarter sales. The Zacks Consensus Estimate for fourth-quarter Keytruda sales is pegged at $1.3 billion, flat with the year-ago actual figure.

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 had approved the drug for this indication in July 2017. The Zacks Consensus Estimate for the drug’s sales in the fourth quarter is $315 million.

In November 2017, Bristol-Myers announced that the FDA has approved line extension of Orencia in pediatric patients with Ph+ chronic myeloid leukemia in chronic phase. The label expansions (including psoriatic arthritis in July 2017) and new administration option approved in June 2017 is expected to fuel growth of the drug, which registered growth of 10% in the previous quarter. The Zacks Consensus Estimate for Orencia sales is $686 million.

On the other hand, the decline in Hepatitis C franchise is expected to continue due to intense competition from multiple drugs including Epclusa whose 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 $55 million this quarter, down 75.7% from year-ago quarter actual figure.

The company is developing its key drug, Opdivo as monotherapy as well as combination therapy for several tumor types in multiple studies, with two label expansion applications under review in the United States. We expect investor focus on updates related to Opdivo on the conference call.

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 +0.35%. 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 Consensus


Bristol-Myers Squibb Company Price and Consensus | 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.

Alexion Pharmaceuticals, Inc. ALXN is scheduled to release its results on Feb 8. The company has an Earnings ESP of +3.45% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Anthera Pharmaceuticals, Inc. ANTH is expected to release its results on Feb 26. The company has an Earnings ESP of +20.47% and a Zacks Rank #2.

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