Bristol-Myers Squibb (BMY) traces its beginnings to 1887; today, it is a leader in the cardiovascular health and anti-cancer categories, with annual revenue of $42 billion, and a market capitalization of $136 billion, explains income expert Ben Reynolds, editor of Sure Dividend.
Bristol-Myers completed the blockbuster acquisition of Celgene Corp. in late-2019 for $74 billion, giving the company access to Celgene’s Revlimid brand before it loses patent protection in 2022.
Bristol-Myers reported first-quarter earnings on May 7th and results were better than expected on both the top and bottom lines. Adjusted earnings-per-share soared 56% to $1.72, while revenue rose even more quickly, adding 82% year-over-year to $10.8 billion.
Bristol-Myers has a history of producing blockbuster drugs in-house, including examples like Opdivo and Eliquis. Bristol-Myers tends to hold up very well during recessions given that people generally seek treatment for serious illnesses irrespective of economic conditions.
We see Bristol-Myers producing 4% annual earnings-per-share growth, with 2021 being an outlier to the upside thanks to the Celgene acquisition.
With Bristol-Myers slated to earn $6.10 per share this year, the stock trades for a price-to-earnings ratio of 9.9, which compares very favorably to our estimate of fair value at 13.5 times earnings.
That implies the stock is undervalued, and it should see a 6.5% annual tailwind to total returns from the valuation. Combined with the 3% dividend yield and 4% earnings growth, we expect Bristol-Myers to produce annual returns for shareholders of 13.5% over the next five years.
