Bristol-Myers (BMY): Stock To Beat Earnings Again In Q2

Bristol-Myers Squibb Company (NYSE:BMY) is scheduled to report second-quarter 2016 results on Jul 28, before the opening bell. Last quarter, the company reported a positive earnings surprise of 12.12%.

Bristol-Myers has been seen to consistently beat earnings expectations. The company’s earnings surpassed expectations in each of the last four quarters, with an average positive surprise of 27.67%. Will Bristol-Myers be able to beat estimates this time around as well? Let's see how things are shaping up for this announcement.

Factors Driving Q2 Results

Bristol-Myers’ high-profile immuno-oncology drug, Opdivo, continues to demonstrate strong performance across three tumors. It is the most prescribed drug for new patients in lung cancer. The renal cell carcinoma indication has also seen strong early adoption. In the melanoma indication, robust performance of the Opdivo/Yervoy (Yervoy is Bristol-Myers’ other immuno-oncology drug) regimen is contributing to growth in both Opdivo and Yervoy.

Opdivo should continue to contribute to top-line growth on the back of continued approvals and label expansions globally. Pricing and reimbursement in additional EU countries should further aid revenues. Other oncology drugs like Sprycel should also continue to perform well in the second quarter of 2016. Meanwhile, multiple myeloma drug, Empliciti, has been off to an encouraging start in the U.S. It gained EU approval during the second quarter (May 2016).

Apart from cancer drugs, anticoagulant Eliquis’ performance should continue to accelerate growth across the key markets globally where its uptake has been strong across cardiology, hospitals, and in the community setting. Eliquis is well on its way to become the number one novel anticoagulant globally. The rheumatoid arthritis drug, Orencia, also contributes significantly to the company’s top line.

With key products performing well, Bristol-Myers raised both its 2016 earnings and revenue guidance driven by strong trends across the business at the time of announcing first-quarter 2016 results. For 2016, the company expects earnings in the range of $2.50 to $2.60 per share (old guidance: $2.30 to $2.40 per share). On the other hand, Bristol-Myers expects worldwide revenues to increase in the low double-digit range in 2016. Previously, the company had guided worldwide revenues to increase in the mid-single-digit range.

However, the company expects the HIV and HCV franchises to remain under competitive pressure for the remainder of the year.

During the second quarter, Bristol-Myers continued to actively build its partnership portfolio by striking a couple of immuno-oncology focused collaborations.

On the second-quarter call, investor focus is expected to remain on the company’s performance and updated possible revision in the guidance along with an update on business development activities.

Why a Likely Positive Surprise?

For the second quarter of 2016, our proven model also shows that Bristol-Myers is likely to beat earnings estimates because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.49%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #1 (Strong Buy): Note that stocks with a Zacks Ranks #1, #2 (Buy) or #3 (Hold) have a significantly higher chance of beating earnings. However, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The combination of Bristol-Myers’ Zacks Rank #1 and +1.49% ESP makes us reasonably confident of an earnings beat this season.

Other Stocks That Warrant a Look

Bristol-Myers is not the only company looking up this earnings season. Here are some other health care stocks that you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter.

Amgen Inc. (NASDAQ:AMGN) has an Earnings ESP of +1.10% and a Zacks Rank #3. It is scheduled to report second-quarter results on Jul 27.

United Therapeutics Corporation (NASDAQ:UTHR) has an Earnings ESP of +2.51% and a Zacks Rank #3. It is scheduled to report second-quarter results on Jul 28.

Sanofi (NYSE:SNY) has an Earnings ESP of +1.33% and a Zacks Rank #3. It is scheduled to report second-quarter results on Jul 29.