Biopharmaceutical giant Bristol-Myers Squibb Company (BMY) is all set to report its first quarter 2012 results before the start of trading on April 26, 2012. The Zacks Consensus Estimate for the first quarter of 2012 is 61 cents (year-over-year increase of 5.2%) on revenues of $5,261 million (year-over-year increase of 5.0%).
Fourth Quarter Recap
Bristol-Myers' fourth quarter 2011 adjusted earnings of 53 cents per share fell short of the Zacks Consensus Estimate by 2 cents. Adjusted earnings in the final quarter of 2011 were above the year-ago earnings by 6 cents. Higher-than-expected expenses led to the earnings miss in the reported quarter.
Net sales in the final quarter of 2011 quarter climbed 7% to $5.45 billion. Revenues were just shy of the Zacks Consensus Estimate of $5.48 billion mainly due to lower sales of Plavix and Avapro/Avalide. (Read our full coverage on this earnings report: Bristol-Myers Misses on All Fronts ).
Agreement of Estimate Revisions
Over the last 30 days, 3 of the 13 analysts covering Bristol-Myers for the first quarter of 2012 have trimmed their earnings estimates with a sole upward movement. We believe that the downward bias for the first quarter of 2012 is due to the fact that block-buster blood-thinner Plavix is slated to go off patent in the US in May 2012. This is likely to result in substantial revenue losses for Bristol-Myers. Bristol-Myers has co-developed Plavix with Sanofi (SNY).
This has caused estimates for the second quarter of 2012 (in which Plavix is actually scheduled to go off patent) also to have a downward bias. Over the last 30 days, 2 analysts have trimmed earnings estimates for the second quarter of 2012 with no upward movement.
Due to the impending loss of exclusivity of Plavix in the US, the fiscal 2012 earnings estimate of $1.96 is 14.0% below the earnings reported by Bristol-Myers in 2011. Over the last 30 days, fiscal 2012 estimates have been revised by only 4 of the 15 analysts covering Bristol- Myers. While 3 analysts have upped estimates, 1 has moved in the opposite direction.
Bristol-Myers is looking to combat the generic threat through partnering deals and acquisitions. Apart from acquisitions and partnership deals, Bristol-Myers is looking to introduce new products to augment its product portfolio to combat the generic threat. Bristol-Myers has met with a fair amount of success towards achieving this objective. Many new products were launched/ approved in 2011.
Bristol-Myers continued to receive encouraging news in its endaveour to expand its product portfolio. Recently, the Committee for Medicinal Products for Human Use of the European Medicines Agency (EMA) issued a positive opinion regarding the approval of type II diabetes candidate Forxiga (dapagliflozin) in the EU. Bristol-Myers has co-developed Forxiga with AstraZeneca (AZN).
Moreover, a key action date is coming up at Bristol-Myers next month when the US Food and Drug Administration (FDA) is scheduled to decide on blood thinner Eliquis, co-developed with Pfizer (PFE), for preventing stroke in patients suffering from atrial fibrillation. Positive news from the FDA will boost the stock.
Magnitude of Estimate Revisions
Given the downward bias in earnings estimate revisions witnessed over the last month, earnings estimates for the first and second quarters of 2012 have gone down by 2 cents and 1 cent to 61 cents and 50 cents, respectively. Earnings estimate for fiscal 2012 has remained static at $1.96 per share over the last 30 days.
Surprise History
Bristol-Myers has surpassed earnings estimates in three of the last four quarters. The company, while missing estimates in the final quarter of 2011, recorded a maximum positive surprise of 9.43% in the first quarter of 2011. On an average, the earnings surprise was 3.20%.
Our Recommendation
We currently have a Neutral recommendation on Bristol-Myers. The stock carries a Zacks #3 Rank (Hold rating) in the short run. Even though we are concerned about the high generic risk on many of Bristol-Myers' leading franchises, we believe that the company's diversified business model coupled with its strong financial position will help in tough situations.
