Bristol-Myers Back to Neutral - Analyst Blog


We are reverting to a Neutral recommendation on Bristol-Myers Squibb Company ( BMY ) 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 Sanofi ( SNY ), 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.

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 with Pfizer Inc . ( PFE ) 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 look at Actelion Ltd. ( ALIOF ) 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 current levels.


BRISTOL-MYERS (BMY): Free Stock Analysis Report

PFIZER INC (PFE): Free Stock Analysis Report

SANOFI-AVENTIS (SNY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ALIOF , BMY , PFE , SNY

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