Will Oncology Products Drive Bristol-Myers (BMY) Earnings? - Analyst Blog

Bristol-Myers Squibb Company (BMY) is scheduled to report its fourth-quarter 2014 results on Jan 27, before the opening bell.

In the last quarter, Bristol-Myers delivered a positive 9.76% earnings surprise – the fifth successive earnings beat – driven by strong sales of its oncology drugs. Let’s see how things are shaping up for this announcement.

Oncology Drugs Could Drive Q4 Results

Will oncology product sales, which have been driving the company’s performance in the last few quarters, continue to be the driving force this quarter?

Products like Yervoy (skin cancer), Sprycel (leukemia) and Orencia (rheumatoid arthritis) should continue to perform well in the fourth quarter of 2014. Anti-clotting drug Eliquis showed improvement in the third quarter. It is expected that the product will register strong growth this quarter as well driven by approval for new indications.

However, sales of Baraclude (hepatitis B virus), Reyataz (HIV) and Sustiva (HIV) are expected to decline in the quarter due to generic competition.

At the time of releasing third quarter results, Bristol-Myers had maintained its 2014 adjusted earnings per share guidance in the range of $1.70 to $1.80. The company’s 2014 revenue guidance was also maintained in the range of $15.2 billion to $15.8 billion.

We believe that investor focus will remain on updates on the company’s high-profile immuno-oncology drug, Opdivo. Opdivo gained accelerated approval in Dec 2014 for the melanoma indication based on tumor response rate and the durability of response. Investors are also looking forward to the company’s outlook for 2015, which is expected to be revealed along with the earnings release.

Earnings Whispers?

Our proven model does not conclusively show that Bristol-Myers is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here, as elaborated below.

Negative Zacks ESP: This is because the Most Accurate estimate stands at 39 cents per share, while the Zacks Consensus Estimate is higher at 40 cents. This results in an ESP of -2.50%.

Zacks Rank: Bristol-Myers’ Zacks Rank #3 (Hold) increases the predictive power of the ESP. However, we need to have a positive ESP to be confident of an earnings beat.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) 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 these have the right combination of elements to post an earnings beat this quarter.

The earnings ESP for Mallinckrodt (MNK) is +0.65% and it carries a Zacks Rank #2 (Buy). The company is scheduled to release its first quarter fiscal 2015 results on Feb 3.

Pfizer Inc. (PFE) has an earnings ESP of +1.89% and carries a Zacks Rank #3 (Hold). It is scheduled to report fourth-quarter results on Jan 27.

AbbVie Inc. (ABBV) has an earnings ESP of +1.18% and carries a Zacks Rank #2. It is expected to report fourth-quarter results on Jan 30.

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