Bristol-Myers: A Strong Buy for Growth & Income

Bristol-Myers Squibb Company (BMY) is a biopharmaceutical company with a mission to discover, develop and deliver innovative medicines that help patients prevail over serious diseases, asserts Crista Huff, editor of Cabot Undervalued Stocks Advisor.

Bristol-Myers purchased Celgene for $74 billion in November 2019. The merged company markets a long list of pharmaceuticals, including Revlimid, Eliquis and Opdivo, to treat cardiovascular, oncology and immunological diseases.

The company expects revenue and profit growth to come from four areas: sales volume increases from current products, development and launch of new medicines, life cycle management and synergies from the Celgene acquisition.

Bristol-Myers announced that Opdivo in combination with Yervoy was approved by the FDA for the first-line treatment of a specific group of adult patients with metastatic non-small cell lung cancer (NSCLC).

The company also announced FDA approval of Pomalyst for patients with AIDS-related Kaposi sarcoma whose disease has become resistant to highly active antiretroviral therapy (HAART), or in patients with Kaposi sarcoma who are HIV-negative. Pomalyst was granted accelerated approval, Breakthrough Therapy designation and Orphan Drug designation.

The company is expected to increase EPS by 32% and 20% in 2020 and 2021, and the 2020 P/E is 10.4. Bristol-Myers’ financial priorities include debt repayment, investment in innovation, share repurchases and annual dividend increases.

I would expect earnings growth to slow in subsequent years as the company digests the Celgene merger and business grows at a more normal pace. Bristol-Myers is appropriate for growth investors and income investors. With a yield of 2.8%, the stock is rated a "Strong Buy" in our growth and income model portfolio.

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