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Is a Beat in Store for Bristol-Myers (BMY) in Q3 Earnings?

We expect Bristol-Myers Squibb CompanyBMY to beat expectations when it reports third-quarter 2017 results on Oct 26, before the market opens.

Year to date, Bristol-Myers' shares have increased 10.2% while the industry has recorded an increase of 20.5%.

Bristol-Myers' track record has been positive so far. The company delivered positive earnings surprise in three of the last four quarters and missed expectations in one. The average positive earnings surprise in the last four quarters is 7.99%. In the last reported quarter, Bristol-Myers came up with a positive surprise of 1.37%.

Let's see how things are shaping up for this quarter.

Factors at Play

Bristol-Myers' high-profile immuno-oncology drug, Opdivo is expected to be the primary sales driver in the third quarter. The drug is already approved in multiple cancer indications. During this quarter, the FDA approved the drug for two additional indications - hepatocellular carcinoma and metastatic colorectal cancer - in patients who have received prior treatment. Although, these label expansions are not expected to have much impact on the top line, these when combined with the two label expansions in the second quarter will certainly boost sales.

Although the second quarter saw some stability in the second-line lung cancer setting, FDA's approval of Merck's MRK Keytruda in May for the first-line treatment of metastatic nonsquamous NSCLC will increase competition and may impact sales unfavorably. The Zacks Consensus Estimates indicates the drug sales to increase 31% from the year-ago quarter to $1.2 billion.

In July, the FDA also approved the label expansion of Yervoy injection in pediatric patients 12 years of age and older with unresectable or metastatic melanoma. The Zacks Consensus Estimate for the drug this quarter is $323 million.

Meanwhile, rheumatoid arthritis drug, Orencia, received approval for treating psoriatic arthritis in the United States as well as in Europe in July. Moreover, in June, Bristol-Myers announced the availability of subcutaneous administration option for Orencia in patients with moderately to severely active polyarticular juvenile idiopathic arthritis. The label expansion and new administration option is expected to fuel growth of the drug. The drug, which registered growth of 10% in the previous quarter, is expected to generate sales of $635 million this quarter, per the Zacks Consensus Estimate.

On the other hand, the decline in the Hepatitis C franchise is expected to continue due to intense competition from multiple drugs including Epclusa whose label was expanded to include HIV co-infection in August. Moreover, the HIV business continues to face competitive pressure. Recent launches by other companies in the same space are expected to further impact the Sustiva franchise. The Zacks Consensus Estimate for Hepatitis C franchise sales is pegged at $108 million this quarter, down 71.5% from year ago quarter.

The company is developing its key drug, Opdivo as monotherapy as well as combination therapy for several tumor types in multiple studies, with two label expansion applications under review in the United States. We expect investor focus on updates related to Opdivo in the conference call.

Why a Likely Positive Surprise?

Our proven model indicates that Bristol-Myers is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate (earnings of 77 cents) and the Zacks Consensus Estimate (earnings of 76 cents), stands at +0.79%. This is a leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Bristol-Myers currently has a Zacks Rank #3. The combination of a positive Earnings ESP and a favorable Zacks Rank makes us reasonably confident of an earnings beat.

Conversely, we caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Bristol-Myers Squibb Company Price and EPS Surprise

Bristol-Myers Squibb Company Price and EPS Surprise | Bristol-Myers Squibb Company Quote

Other Stocks That Warrant a Look

Here are some biotech stocks that you may also want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Clovis Oncology, Inc. CLVS is expected to release its results on Nov 2. The company has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Celgene Corp. CELG is scheduled to release its results on Oct 26. The company has an Earnings ESP of +0.08% and a Zacks Rank #3.

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Bristol-Myers Squibb Company (BMY): Free Stock Analysis Report

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Clovis Oncology, Inc. (CLVS): 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 Nasdaq, Inc.


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

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