We are reverting to a Neutral recommendation on
Bristol-Myers Squibb Company
) from Underperform as we believe that the current price reflects
all the negative news. Consequently, there is limited scope for
stock price appreciation at Bristol-Myers. The stock carries a
Zacks Rank #3 (Hold) in the short run.
Why Back to Neutral?
Bristol-Myers reported earnings (excluding special items) of 44
cents per share in the second quarter of 2013, down 9% from the
year-ago figure. The decline was due to reduced sales of Plavix
and Avapro. Both drugs, co-developed with
), went off patent in the U.S. last year.
The genericization of Plavix and Avapro in the U.S. has
resulted in a significant loss of revenues. The modest revenues
reported by the company in the second quarter of 2013 were
primarily due to lower sales of both drugs.
Avapro/Avalide recorded a 52% decline in global net sales to
$56 million in the second quarter of 2013. Global net sales of
Plavix plummeted 94% to $44 million in the second quarter of
2013. U.S. sales of the drug plunged 97% to $18 million. We
believe that Bristol-Myers has entered a challenging period
following Plavix's genericization.
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Following the lackluster performance, the company trimmed its
2013 guidance. Bristol-Myers now expects adjusted earnings for
2013 in the range of $1.70-$1.78 (old guidance: $1.78-$1.88). The
company slashed its outlook reflecting negative currency movement
and the recall of Fervex, a local OTC product in France and other
international markets. Bristol-Myers also cut its revenue
guidance. Moreover, anti-clotting drug, Eliquis, co-developed
) also performed disappointingly in the second quarter of 2013.
We believe the current price incorporates all the negative news
and are reverting to a Neutral recommendation on the stock.
A Stock worth Considering
While we expect Bristol-Myers to perform in line with its peers
and industry levels in the coming months and advice investors to
wait for a better entry point before accumulating shares, one can
) as a good buying opportunity. This biopharmaceutical company -
sporting a Zacks Rank #1 (Strong Buy) - has performed
encouragingly of late with potential to rise significantly from