Is a Beat in Store for Bristol-Myers (BMY) in Q2 Earnings?
We expect Bristol-Myers Squibb Company BMY to beat expectations when it reports second-quarter 2018 results on Jul 26, before market open.
Bristol-Myers’ shares have decreased 7.4% so far this year compared with the industry’s decline of 1.2%.
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 2.71%. In the last reported quarter, Bristol-Myers delivered a positive surprise of 10.59%.
Let’s see how things are shaping up for this quarter.
What Will Drive Growth in Q2?
Bristol-Myers’ blockbuster immuno-oncology drug, Opdivo is expected to remain one of the primary drivers of sales in the second quarter. The drug has been approved for several line extensions in the past year. In the soon-to-be reported quarter, Opdivo was approved as a monotherapy for the treatment of squamous cell carcinoma of the head and neck in Europe. The drug also received approval in China for the treatment of non-small cell lung cancer (“NSCLC”) in second-line setting.
The company announced superior progression-free survival data from a phase III study evaluating Opdivo in first-line NSCLC. 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 combination also showed encouraging data in a follow-up study evaluating it in advanced renal cell carcinoma patients. The Zacks Consensus Estimate for the drug’s sales in the second quarter is pegged at $1.48 billion.
Meanwhile, Yervoy’s line extension in pediatric patients 12 years of age and older with unresectable or metastatic melanoma was approved in Europe in the first quarter of 2018. We expect the approval boost sales in the second quarter. The Zacks Consensus Estimate for the drug’s sales this quarter is $273 million.
The line extension of Sprycel in pediatric patients with Ph+ chronic myeloid leukemia in chronic phase late last year did not yield significant impact sales, which decreased 5% last quarter. The uptake in the expanded population remains to be seen in this quarter. The Zacks Consensus Estimate for Sprycel sales stands at $545 million. Cardiovascular drug, Eliquis, continued its strong performance in the first quarter, with sales growing 37% year over year. Sales are expected to remain robust in the second quarter too. The Zacks Consensus Estimate for Eliquis sales is pegged at $1.6 billion.
However, the Hepatitis C and HIV business continues to face competitive pressure. Sales for the franchise are expected to decline. The Zacks Consensus Estimate for Hepatitis C franchise sales is pegged at $9 million for the second quarter, down 93.6% from the year-ago quarter actual figure.
Bristol-Myers may see increase in operating expenses due to cost related to launch of drugs in expanded indications and ongoing clinical studies of Opdivo and other drugs.
Bristol-Myers’ top line was driven by strong performance of Opdivo and Eliquis in the first quarter, which is expected to continue for the full year. Moreover, continued strong performance of 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 top line. The company also faces stiff competition in the immuno-oncology space. The HIV business continues to face competitive pressure.
Meanwhile, investors remain focused on any update related to regulatory application for approval of Opdivo in the lucrative first-line NSCLC.
The Zacks Consensus Estimate for sales and earnings for the second quarter is pegged at $5.42 billion and 87 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.
Earnings ESP: Its Earnings ESP is +0.79%. The Zacks Consensus Estimate is pegged at 87 cents. 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.
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 PFE is scheduled to release its results on Jul 31. The company has an Earnings ESP of +0.89% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
AbbVie ABBV is scheduled to release its results on Jul 27. The company has an Earnings ESP of +0.15% and a Zacks Rank #3.
Horizon Pharma HZNP is scheduled to release its results on Aug 8. The company has an Earnings ESP of +19.66% and a Zacks Rank #3.
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