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Pharmaceutical giant  Bristol-Myers Squibb Company (BMY - Analyst Report) is all set to unveil its fourth quarter and full year 2011 results on January 26, 2012 before the start of trading. The Zacks Consensus Estimate for the fourth quarter is $0.55 (year-over-year increase of 17%) on revenues of $5,472 million (year-over-year increase of 7.1%). For 2011, the Zacks Consensus Estimate is $2.30 (year-over-year increase of 6.5%) on revenues of $21,293 million (year-over-year increase of 9.3%).

Third Quarter Recap

Bristol-Myers’ third quarter 2011 earnings (excluding special items) of $0.61 per share surpassed the Zacks Consensus Estimate by $0.03 and the year-ago earnings by $0.02. Higher revenues boosted earnings in the reported quarter.

Net sales in the third quarter climbed 11.4% to $5.35 billion. Foreign exchange positively impacted sales in the quarter by approximately 3%. Revenues also surpassed the Zacks Consensus Estimate of $5.28 billion, driven by the impressive showing of Bristol-Myers’ lead drugs including blood thinner Plavix.

 (Read our full coverage on this earnings report: Bristol-Myers Tops, Adjusts View ).

Agreement of Estimate Revisions

Over the past seven days, most analysts covering Bristol-Myers have left their earnings estimates for the final quarter as well as annual 2011 unchanged. The last 7 days has seen only 1 analyst revising earnings estimate for the final quarter of 2011. The revision has been in the upward direction. The annual estimates for fiscal 2011 too have been similarly revised over the last 7 days. We believe that most analysts have preferred to adopt a wait-and-watch approach until Bristol-Myers unfurls its results on January 26 before revising their estimates. Earnings estimates for 2012 have been slashed by 2 analysts over the last 7 days with no upward movement(s).

We believe that the downward bias for 2012 is due to the fact that block-buster blood-thinner Plavix is slated to go off patent in the US in May 2012. This is likely to result in substantial revenue losses for Bristol-Myers. Bristol-Myers has co-developed Plavix with Sanofi (SNY - Analyst Report).

Bristol-Myers is looking to combat the generic threat through partnering deals and acquisitions. Apart from acquisitions and partnership deals Bristol-Myers is looking to introduce new products to augment its product portfolio to combat the generic threat. Bristol-Myers has met with a fair amount of success this year toward achieving this objective. Many new products have been launched/ approved in 2011.

Apart from the earnings report, we believe that investor focus will be on Bristol-Myers’ $2.5 billion deal to acquire Inhibitex . Through this deal, announced earlier this month, Bristol-Myers is targeting the lucrative hepatitis C virus market.  We believe that Bristol-Myers will continue pursuing deals and acquisitions throughout 2012 to strengthen its portfolio thereby minimizing the impact of genericization.

Magnitude of Estimate Revisions

Given the lack of earnings estimate revisions, earnings estimates for the fourth quarter and full year 2011 have remained unchanged over the last 7 days. The current Zacks Consensus Estimates for the to-be-reported quarter and fiscal 2011 are $0.55 and $2.30, respectively.

Surprise History

Bristol-Myers has surpassed earnings estimates in three of the last four quarters. The company, while missing estimates in the final quarter of 2010, recorded a maximum positive surprise of 9.43% in the first quarter of 2011. On an average, the earnings surprise was 3.59%.

Our Recommendation

We currently have a Neutral recommendation on Bristol-Myers. The stock carries a Zacks #4 Rank (Sell rating) in the short run. Even though we are concerned about the high generic risk on many of Bristol-Myers’ leading franchises, we believe that the company’s diversified business model coupled with its strong financial position will help in tough situations.

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