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Bristol-Myers Squibb Company (BMY - Analyst Report) is scheduled to release its fourth quarter 2013 results before the opening bell on Friday, Jan 24.

Last quarter, Bristol-Myers had posted a positive earnings surprise of 4.55%. We expect the company to beat expectations in the fourth quarter as well.

Why a Likely Positive Surprise?

Our proven model shows that Bristol-Myers is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: The Earnings ESP (Expected Surprise Prediction), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.38%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #3 (Hold): Note that stocks with a Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings estimates. 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 revision momentum.

The combination of Bristol-Myers’ Zacks Rank #3 and an ESP of +2.38% makes us confident of an earnings beat this season.

What is Driving Earnings?

Bristol-Myers has delivered positive earnings surprises in two of the last four quarters with an average beat of 6.93%. Drugs like Baraclude (hepatitis B virus), Sustiva (HIV), Sprycel (leukemia), Yervoy (skin cancer), Erbitux (oncology) and Onglyza/Kombiglyze (diabetes), which performed encouragingly last quarter are expected to perform well in the fourth quarter as well.

Moreover, the newly launched products, especially in the cancer and diabetes fields, are expected to play a key role in boosting the company’s bottom line this quarter. We note that Bristol-Myers has been trying to offset the declining sales of some of its important products by bringing in new products through in-licensing deals.

Other Stocks to Consider

Bristol-Myers is not the only company looking up this earnings season. We also see likely earnings beats coming from these companies in the medical sector:

Biogen Idec. (BIIB - Analyst Report) has an Earnings ESP of +9.01% and holds a Zacks Rank #3. Biogen will be reporting fourth quarter earnings on Jan 29.

Perrigo Company Public Limited Company (PRGO - Analyst Report) has an Earnings ESP of +1.88% and holds a Zacks Rank #3. Perrigo will be reporting second quarter fiscal 2014 earnings on Feb 6.

Pfizer Inc. (PFE - Analyst Report) has an Earnings ESP of +1.92% and holds a Zacks Rank #3. Pfizer will be reporting fourth quarter earnings on Jan 28.

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