Bristol-Myers Squibb Company (BMY) is scheduled to report its third-quarter 2014 results on Oct 24, before the opening bell.
In the last quarter, Bristol-Myers had delivered a positive 9.09% earnings surprise – the fourth successive earnings beat – driven by strong sales of its oncology drugs. Let’s see how things are shaping up for this announcement.
Factors to Influence Q3 Results
We expect products like Yervoy (skin cancer), Sprycel (leukemia) and Orencia (rheumatoid arthritis) to perform well in the third quarter of 2014. Anti-clotting drug Eliquis is also expected to register strong sales in the reported quarter.
However, sales of Baraclude (hepatitis B virus) and Sustiva (HIV) are expected to decline in the quarter due to generic competition. Abilify (schizophrenia, bipolar mania disorder and major depressive disorder) sales in the quarter are expected to be hurt by the expiration of Bristol-Myers’ commercialization rights in the EU in Jun 2014. Focus will be on the newly approved cocktail therapy, Daklinza plus Sunvepra, for treating chronic hepatitis C virus (HCV).
In Jul 2014, the Japanese Ministry of Health, Labour and Welfare (MHLW) cleared the combination of Daklinza and Sunvepra for treating patients suffering from the genotype 1 strain of chronic HCV, including those affected by compensated cirrhosis. The cocktail therapy gained EU approval in August this year. However, currency headwinds are expected to hurt the company’s top line.
We expect research & development costs to increase in the third quarter due to the company’s efforts on developing its pipeline. We also expect the biopharmaceutical major to provide a detailed update on the status of its pipeline candidates on the earnings call. Moreover, the bottom line in the third quarter is expected to be hurt by higher tax rates.
Earnings Whispers?
Our proven model does not conclusively show that Bristol-Myers is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) 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 41 cents per share, while the Zacks Consensus Estimate is higher at 42 cents. This results in an ESP of -2.38%.
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 momentum.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.
The earnings ESP for Ligand Pharmaceuticals Inc. (LGND) is +30.00% and it carries a Zacks Rank #1 (Strong Buy). The company is scheduled to release third-quarter results on Oct 27.
Teva Pharmaceutical Industries Limited (TEVA) has an earnings ESP of +5.79% and carries a Zacks Rank #2 (Buy). It is scheduled to report third-quarter results on Oct 30.
Vertex Pharmaceuticals Inc. (VRTX) has an earnings ESP of +28.07% and carries a Zacks Rank #2. It is expected to report third-quarter results on Oct 28.
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