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What's in the Offing for Bristol-Myers (BMY) in Q2 Earnings?

Bristol-Myers Squibb Company BMY is scheduled to report first-quarter 2017 results on Jul 27, before the opening bell. Last quarter, the company beat earnings estimates by 16.7%.

Bristol-Myers’ stock has lost 26.4% in the past year, underperforming the industry, which remained flat in that period.

Bristol-Myers has a decent track record so far. The company’s earnings beat estimates in three of the trailing four quarters, with an average positive surprise of 8.39%. Will Bristol-Myers surpass expectations this time as well?

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

Factors to Impact This Quarter

Bristol-Myers’ high-profile immuno-oncology drug, Opdivo, should continue to drive the company’s top line in the to-be-reported quarter. Opdivo’s U.S. sales are driven by the melanoma, second-line non-small-cell lung cancer and renal cell carcinoma indications.

Recent label expansions into the classical Hodgkin lymphoma and head and neck cancer indications should boost the drug’s sales.  However, the lung-cancer market in the U.S. became more competitive in 2016 due to the entry of Tecentriq.

Bristol-Myers expects the second-line lung cancer business to be under competitive pressure. As a result, sales of the drug in the U.S. market is projected be flat in 2017. Although the first quarter saw some stability in the second-line lung cancer, the recent FDA approval of Merck’s MRK Keytruda for the first-line treatment of metastatic nonsquamous NSCLC will further impact sales.

On the other hand, the virology business is expected to decline significantly in 2017 due to competition from Epclusa. 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.

Bristol-Myers is also looking to diversify its portfolio with the development of BMS-986036 for NASH.

On a positive note, Bristol-Myers raised its earnings expectations for 2017 concurrent with the first-quarter results. The company now projects earnings in the range of $2.85–$3.00 per share (old guidance: $2.70 to $2.90). Revenues are expected to grow in mid- to single-digit range due to strong trends across the business, particularly in key products like Opdivo, Eliquis and Yervoy. Gross margins are projected to decline as the year progresses and are estimated in the 72–73% range.  R&D expenses are expected to increase in the low-double digit range.

In the second-quarter earnings call, investors are expected to focus on the company’s performance and label expansion efforts for Opdivo, along with updates on business development activities.

Earnings Whispers

Our proven model does not conclusively show 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. Unfortunately, that is not the case here, as elaborated below.

Zacks ESP: The Earnings ESP for Bristol-Myers is 0.0% since both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 73 cents. 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 increases the predictive power of ESP. However, its 0.0% ESP makes it unlikely for the stock to beat earnings this quarter. As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

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

Vertex Pharmaceuticals Incorporated VRTX has an Earnings ESP of +66.7% and carries a Zacks Rank #1. The company is scheduled to release results on Jul 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead Sciences, Inc. GILD has an Earnings ESP of +3.32% and carries a Zacks Rank #3. The company is scheduled to release results on Jul 26.

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Bristol-Myers Squibb Company (BMY): Free Stock Analysis Report
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