As yet another indication of a sea change in the macro-economic environment, the Bank of Japan signaled a shift in its monetary stance today by announcing that the 10-year government bond yield can go as high as 0.5%, up from the previous cap of 0.25%.

With the era of easy money in the rear-view mirrors, the smart money has given up its pursuit of speculative and unproven investments and banking on profitable businesses with robust demand and margins immune to an increasingly probable economic slowdown.

Pharma major Bristol-Myers Squibb Company (BMY) discovers, develops, manufactures, and markets biopharmaceutical products globally. The company offers solutions for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and Covid-19 diseases.

In August, the company announced the completion of its acquisition of Turning Point in an all-cash transaction. The company has been able to keep its guidance unchanged despite the challenging macroeconomic climate.

Giovanni Caforio, M.D., board chair and chief executive officer, expressed his confidence by stating, “Combined with our financial strength and talented employees, Bristol Myers Squibb is well positioned for growth and to advance new medicines for patients.”

BMY’s stock has gained 18.2% year-to-date to close the last trading session at $73.16.

Let’s closely examine the factors that make it worthy of investment:

Recent Breakthroughs

On November 29, BMY and Envisagenics, an AI-driven biotechnology company that delivers therapies for RNA splicing diseases, announced a research collaboration agreement to leverage Envisagenics’ SpliceCore® AI platform. This is expected to expand BMY’s vast oncology pipeline.

On November 10, 2022, BMY announced that it had received Health Canada’s approval for its CAMZYOSTM (mavacamten capsules) to treat symptomatic obstructive hypertrophic cardiomyopathy. This should help the company provide a new treatment option to patients and thus expand its revenue stream.

On October 31, BMY announced positive topline results of the Phase 3 COMMANDS trial. With this, the company is one step closer to addressing a significant need for new and better first-line treatment options for patients with transfusion-dependent myelodysplastic syndromes (MDS).

On October 26, BMY announced new retrospective analyses on serologic responses and clinical outcomes with COVID-19 vaccination in participants treated with Zeposia (ozanimod) from the ongoing Phase 3 DAYBREAK open-label extension (OLE) study in relapsing multiple sclerosis (MS). All adverse events related to COVID-19 in vaccinated study participants were nonserious.

Robust Financials

For the third quarter of fiscal 2022 ended September 30, BMY’s total in-line products and new product portfolio revenue increased 8% year-over-year to $8.62 billion. The company reported net earnings attributable to BMY of $1.60 billion, up 6.7% year-over-year.

The non-GAAP EPS attributable to BMY increased 3.1% year-over-year to $1.99.

Consistent Return of Capital

On December 8, BMY declared a quarterly dividend of $0.57 per share, payable on February 1, 2023, to stockholders of record at the close of business on January 6, 2023. This represents an increase of 5.6% over its previous quarterly dividend rate of $0.54 per share and the fourteenth consecutive fiscal year that the company has increased its dividend.

BMY pays $2.28 annually as dividends. This translates to a yield of 3.12% at the current price, better than the 4-year average dividend yield of 3.03%. Moreover, its dividend payouts have grown at a 6.7% CAGR over the past five years.

Favorable Analyst Estimates

Analysts expect BMY’s revenue for the fiscal year (ending December 2023) to increase 2.7% year-over-year to $47.11 billion. The company’s EPS for the same period is expected to grow 4.3% from the previous year to $7.95. Both metrics are expected to grow by a further 2.8% and 3.1% during the next fiscal year to come in at $48.43 and $8.19, respectively.

Moreover, BMY has an impressive earnings surprise history. It surpassed the consensus EPS estimates in each of the trailing four quarters.

Attractive Valuation

In terms of forward P/E, BMY is trading at 9.60x, which is 51.2% lower than the industry average of 19.68x. Also, the stock’s forward EV/EBITDA multiple of 9.48 is 26.6% lower than the industry average of 12.91, while its forward Price/Sale of 3.54 is 14.5% lower than the industry average of 4.14.

Excellent Asset Utilization by Management

BMY’s trailing 12-month gross profit margin of 79.42% is 44.3% higher than the industry average of 55.03%. Its trailing-12-month EBITDA margin of 44.35% is significantly higher than the industry average of 3.73%, while its net income margin of 14.29% compares favorably with the industry average of negative 5.94%

Additionally, BMY’s trailing-12-month ROCE, ROTC, and ROTA of 19.11%, 8.22%, and 6.80% compare to the respective industry averages of negative 39.69%, 21.95%, and 31.22%, respectively.

POWR Ratings Reflect Fundamental Strength

BMY has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. BMY has an A grade for Value, in sync with its discounted valuation.

It also has a B grade for Stability, Quality, and Sentiment due to its low beta of 0.39, excellent profitability metrics, and favorable analyst estimates, respectively.

BMY is ranked #3 out of 159 stocks in the Medical – Pharmaceuticals industry. Click here to access Growth and Momentum ratings for BMY. 

Bottom Line

BMY has grown its revenue, EBITDA, and net income at 24.6%, 38.6%, and 5.7% CAGRs over the past three years.

Despite the challenges in the macroeconomic environment, its recession-proof business model and fundamental strength hold it in good stead to keep improving its performance and reward its investors with impressive risk-adjusted returns.

How Does Bristol-Myers Squibb Company (BMY) Stack up Against Its Peers?

BMY has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Medical – Pharmaceuticals industry price below $100 and rated A (Strong Buy): Pfizer Inc. (PFE), Astellas Pharma Inc. ADR (ALPMY), and Takeda Pharmaceutical Company Limited (TAK).

BMY shares were trading at $72.69 per share on Tuesday afternoon, down $0.47 (-0.64%). Year-to-date, BMY has gained 20.20%, versus a -18.80% rise in the benchmark S&P 500 index during the same period.

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.

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