This year has been challenging for the stock market due to several macroeconomic and geopolitical issues. However, the market’s downtrend has created several opportunities to invest in quality stocks at attractive valuations.
Bristol-Myers Squibb Company (BMY) is one such stock investors could consider buying for solid long-term returns. The company discovers, develops, licenses, manufactures, and markets biopharmaceutical products worldwide.
BMY surpassed the consensus revenue and EPS estimates in the third quarter. Its revenue beat analyst estimates by 0.3%, while its EPS came 8.5% above the consensus estimate. BMY’s M.D., board chair and CEO Giovanni Caforio said, “Our strong results reflect the growth of our in-line and new product portfolios.” The company has surpassed Street EPS estimates in each of the trailing four quarters.
“Combined with our financial strength and talented employees, Bristol Myers Squibb is well positioned for growth and to advance new medicines for patients,” Caforio added.
Despite the uncertain macroeconomic environment, the company maintained its guidance for this year. Its total sales are expected to be $46 billion, and the non-GAAP gross margin is projected at 79%. Its non-GAAP EPS is expected to come between $7.44 and $7.74.
However, BMY’s GAAP EPS guidance was adjusted from $2.71-$3.01 to $2.54-$2.84 due to the acquisition of Turning Point Therapeutics, Inc. (TPTX). BMY acquired Turning Point Therapeutics for $76 per share. “The acquisition of Turning Point Therapeutics further broadens our leading oncology franchise by adding a best-in-class, late-stage precision oncology asset,” said Giovanni Caforio.
The acquisition of TPTX will help BMY as its lead asset; repotrectinib is the next-generation, potential best-in-class tyrosine kinase inhibitor (TKI) targeting the ROS1 and NTRK oncogenic drivers of non-small cell lung cancer and other advanced solid tumors. BMY expects repotrectinib to be approved in the United States in the second half of 2023.
The drugmaker is known for paying high dividends. BMY paid a quarterly dividend of $0.54 per share on November 1, 2022. It pays a $2.16 per share dividend annually, which translates to a 2.74% yield on the current price. Its four-year dividend yield is 3.03%. Its dividend payouts have grown at a CAGR of 9.6% over the past three years and 6.7% over the past five years.
BMY’s stock has gained 26.5% year-to-date and 38.2% over the past year to close the last trading session at $78.86.
Here’s what could influence BMY’s performance in the upcoming months:
Robust Financials
BMY’s total in-line products and new product portfolio revenue increased 8% year-over-year to $8.62 billion for the third quarter ended September 30, 2022. The company’s non-GAAP earnings before income taxes increased 0.9% year-over-year to $5.13 billion.
Its non-GAAP EPS attributable to BMY increased 3.1% year-over-year to $1.99. Also, its total expenses increased 4.8% year-over-year to $9 billion.
Favorable Analyst Estimates
Analysts expect BMY’s EPS for fiscal 2022 and 2023 to increase 1.4% and 4.3% year-over-year to $7.62 and $7.94, respectively. Its revenue for fiscal 2023 is expected to increase 2.7% year-over-year to $47.11 billion. Its EPS is expected to increase 4.1% per annum over the next five years.
Discounted Valuation
In terms of forward non-GAAP P/E, BMY's 10.35x is 47.1% lower than the 19.56x industry average. Its forward P/S of 3.81x is 11.5% lower than the 4.31x industry average. Also, the stock's 10.11x trailing-12-month EV/EBITDA is 24% lower than the 13.31x industry average.
High Profitability
In terms of trailing-12-month EBIT margin, BMY’s 21.95% compares to the industry average of negative 2.52%. Likewise, its 44.35% trailing-12-month EBITDA margin is significantly higher than the industry average of 3.02%. Furthermore, the stock’s 0.45% trailing-12-month asset turnover ratio is 30.5% higher than the industry average of 0.34%.
POWR Ratings Show Promise
BMY has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. BMY has an A grade for Value, in sync with its discounted valuation.
It has a B grade for Quality, consistent with its high profitability. Its 0.39 beta justifies its B grade for Stability.
BMY is ranked #3 out of 162 stocks in the Medical - Pharmaceuticals industry. Click here to access BMY’s Growth, Momentum, and Sentiment ratings.
Bottom Line
BMY is trading above its 50-day and 200-day moving averages of $73.53 and $73.42, respectively, indicating an uptrend. The company’s revenue and net income have grown at 24.6% and 5.7% CAGRs over the past three years. It is well-positioned for growth with the strategic acquisition of Turning Point Therapeutics, as it is expected to be net earnings accretive.
BMY will benefit from its research breakthroughs, strategic partnerships, and acquisitions. Given its robust financials, favorable analyst estimates, solid dividend payouts, discounted valuation, and high profitability, it could be wise to buy the stock now.
How Does Bristol-Myers Squibb Company (BMY) Stack up Against Its Peers?
BMY has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Medical – Pharmaceuticals industry with an A (Strong Buy) rating: Novo Nordisk A/S (NVO), Pfizer Inc. (PFE), and Dr. Reddy's Laboratories Limited (RDY).
BMY shares were unchanged in premarket trading Wednesday. Year-to-date, BMY has gained 30.41%, versus a -14.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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