With the Federal Reserve officials expected to keep the interest rates high through 2023, a recession looks highly likely. Pharmaceutical stocks could be solid investments during an economic downturn as demand for pharma companies remains unaffected regardless of economic conditions.
Biopharmaceutical major 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.”
“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 fiscal 2022. 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.
The company acquired Turning Point Therapeutics, Inc. (TPTX) for $4.10 billion in cash. “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.
In April 2022, BMY received FDA approval for Camzyos to treat adults with symptomatic New York Heart Association class II-III obstructive hypertrophic cardiomyopathy to improve functional capacity and symptoms. For first-in-class myosin inhibitor Camzyos, BMY believes the drug could bring more than $4 billion in peak sales.
In 2022, the company rolled out three first-in-class therapies in different areas — Camzyos for obstructive hypertrophic cardiomyopathy, Opdualag for melanoma, and Sotyktu for plaque psoriasis.
The drugmaker is known for paying high dividends. BMY is expected to pay a quarterly dividend of $0.57 per share on February 1, 2023. It pays a $2.28 per share dividend annually, which translates to a 3.18% yield on the current price. Its four-year dividend yield is 3.02%. Its dividend payouts have grown at a CAGR of 9.2% over the past three years and 6.9% over the past five years.
BMY’s stock has gained 4.6% over the past three months and 10.1% over the past year to close the last trading session at $71.65.
Here’s what could influence BMY’s performance in the upcoming months:
On January 3, 2023, BMY announced that it had completed the previously announced sale of the manufacturing facility in Syracuse, New York, to South Korea-based LOTTE BIOLOGICS. This divestiture is part of the evolution of its manufacturing facilities to support its current product portfolio. Also, BMY entered into a contract manufacturing organization (CMO) relationship with LOTTE.
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 4.7% year-over-year to $7.62 and $7.98, respectively. Its revenue for fiscal 2023 is expected to increase 2.6% year-over-year to $47.10 billion.
Its EPS is expected to increase 3.9% per annum over the next five years. The company surpassed Street EPS estimates in each of the trailing four quarters.
In terms of forward non-GAAP P/E, BMY’s 9.40x is 52.6% lower than the 19.82x industry average. Its forward P/S of 3.47x is 25.3% lower than the 4.64x industry average. Also, the stock’s 9.32x trailing-12-month EV/EBITDA is 30% lower than the 13.30x industry average.
In terms of trailing-12-month EBIT margin, BMY’s 21.95% compares to the industry average of negative 1.76%. Likewise, its 44.35% trailing-12-month EBITDA margin is significantly higher than the industry average of 3.73%.
Furthermore, the stock’s 0.45% trailing-12-month asset turnover ratio is 32.7% 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 0.43 beta justifies its B grade for Stability.
BMY’s revenue and net income grew at CAGRs of 24.6% and 5.7% over the past three years, respectively. BMY believes its diverse portfolio of therapies across diseases will continue to drive its growth. BMY’s Chief Commercialization Officer Chris Boerner, Ph.D., at the J.P. Morgan Healthcare Conference said that business development would be a “significant focus” for the company this year.
The company believes its new products would compensate for the patent losses and contribute to its long-term growth. 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).
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BMY shares were trading at $71.37 per share on Wednesday morning, down $0.28 (-0.39%). Year-to-date, BMY has declined -0.02%, versus a 2.51% 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. More...
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