Bristol-Myers Squibb Company (BMY), a global biopharmaceutical company, markets a long list of pharmaceuticals, including Revlimid, Eliquis and Opdivo, which treat cardiovascular, oncology and immunological diseases, observes Bruce Kaser, editor of Cabot Undervalued Stocks Advisor.
The company acquired acquired Celgene in 2019. Its financial priorities include debt repayment, investment in innovation, share repurchases and annual dividend increases.
The company reported good-enough second quarter results with adjusted per share earnings of $1.63, which were 38% higher than a year ago. Earnings were about 10% higher than consensus estimates. Revenue growth was flat on a merger-adjusted basis and in-line with consensus estimates.
Drug wholesalers reduced their purchases during the quarter, due to lower patient demand (fewer doctor visits during the pandemic) and due to efforts to reduce their inventories, which weighed on growth. Much of this effect should reverse in the next two quarters.
Bristol-Myers raised their full-year earnings guidance by 6 cents, or about 1%... so small as to be irrelevant but at least it was in the right direction. Management commentary pointed to improved growth prospects in 2021.
While debt remains essentially unchanged since year-end, the cash balance has increased to $22 billion from $16 billion, reflecting strong cash generation. This cash flow is an important part of the Bristol-Myers story, particularly with the shares trading at a low 8.5x estimated 2021 earnings of $7.40.
Recently, the company’s Opdivo cancer treatment showed promising clinical study results and was also approved for certain uses in Canada. The shares provide a generous 2.8% yield, well-covered by its enormous $13.5 billion in free cash flow likely this year. I rate the stock a "strong buy".
