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

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We expect Bristol-Myers Squibb Company (BMY - Free Report) to beat expectations when it reports third-quarter 2018 results on Oct 25, before market open.

Bristol-Myers’ shares have decreased 11.3% so far this year against the industry’s increase of 6.1%.

The company delivered positive earnings surprise in three of the last four quarters and missed expectations once. The average positive earnings surprise in the last four quarters is 6.39%. In the last reported quarter, Bristol-Myers delivered a positive surprise of 16.09%.

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

What Will Drive Growth in Q3?

Bristol-Myers’ key immuno-oncology drug, Opdivo is expected to remain one of the primary drivers of sales in the third quarter with several line extensions in the past year. In August, Opdivo was approved as a monotherapy for the treatment of metastatic small cell lung cancer (“SCLC”) in third-line setting in patients who have received platinum-based chemotherapy and at least one other line of therapy. The drug also received approval for treating microsatellite instability high or mismatch repair deficient metastatic colorectal cancer in combination with Yervoy in second-line setting in the United States.

Opdivo was also approved as adjuvant treatment for completely resected melanoma with lymph node involvement or metastatic disease in Europe. In June, it was approved in China for the treatment of non-small cell lung cancer (“NSCLC”) in second-line setting. The drug which is approved for multiple indications has generated sales of $1.6 billion in the second quarter, growing at a rate of 36.2% from year-ago period. The Zacks Consensus Estimate for the drug’s sales in the third quarter is pegged at $1.63 billion.

Yervoy’s line extension in pediatric patients 12 years of age and older with unresectable or metastatic melanoma was approved in Europe in the first quarter of 2018. The FDA approved the drug in combination with Opdivo for first-line treatment of renal cell carcinoma. We expect the approval to boost sales in the third quarter. The Zacks Consensus Estimate for the drug’s sales this quarter is $327 million.

The European Commission approved a line extension of Sprycel in pediatric patients with Ph+ chronic myeloid leukemia in chronic phase. The uptake in the expanded population has not been impressive in the United States where it was approved last year. The Zacks Consensus Estimate for Sprycel sales stands at $534 million.

Cardiovascular drug, Eliquis, also showed strong performance in the first half, with sales growing 38.6% year over year. Sales are expected to remain robust in the third quarter too. The Zacks Consensus Estimate for Eliquis sales is pegged at $1.66 billion.

However, the Hepatitis C and HIV business continues to face competitive pressure. Sales for the franchise are expected to decline. The Zacks Consensus Estimate for Hepatitis C franchise sales is pegged at $7 million for the third quarter.

Bristol-Myers may see increase in operating expenses due to cost related to launch of drugs in expanded indications and ongoing clinical studies of Opdivo and other drugs.

Conclusion

Bristol-Myers’ top line was driven by strong performance of blockbuster drugs, Opdivo and Eliquis, in the second quarter, which is expected to continue through 2018. Moreover, continued improving performance of Orencia will have a favorable impact.

The Zacks Consensus Estimate for third-quarter sales and earnings is pegged at $5.66 billion and 91 cents, respectively.

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.

Earnings ESP: Its Earnings ESP is +0.73%. The Zacks Consensus Estimate is pegged at 91 cents while the Most Accurate Estimate is pegged at 92 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Bristol-Myers has a Zacks Rank #1. 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.

Other Stocks to Consider

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.

Amgen Inc. (AMGN - Free Report) is scheduled to release its results on Oct 30. The company has an Earnings ESP of +0.56% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vertex Pharmaceuticals Incorporated (VRTX - Free Report) is scheduled to release its results on Oct 24. The company has an Earnings ESP of +3.01% and a Zacks Rank #3.

Regeneron Pharmaceuticals, Inc. (REGN - Free Report) is scheduled to release its results on Nov 6. The company has an Earnings ESP of +2.68% and a Zacks Rank #3.

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