31 Jul

How BMY Is Valued following Its 2Q17 Earnings

WRITTEN BY Mike Benson


Bristol-Myers Squibb (BMY) met Wall Street analysts’ consensus estimate for earnings per share (or EPS) in 2Q17, reporting EPS of $0.74.

BMY surpassed analysts’ consensus estimate for revenue, reporting revenue of $5.14 billion compared to the estimate of $5.08 billion in 2Q17.

How BMY Is Valued following Its 2Q17 Earnings

The chart above shows the comparison between analysts’ estimates and actual EPS over the last few quarters. Let’s take a look at some of BMY’s valuation multiples.

Forward PE

PE (price-to-earnings) multiples represent what one share of a company can buy for an equity investor. On July 28, 2017, Bristol-Myers Squibb was trading at a forward PE of ~17.9x, compared to the industry average of 15.7x.

The company is trading at a lower PE compared to its peer Eli Lilly and Company (LLY), which is trading at a forward PE of 19.1x. It’s trading at a higher forward PE compared to its peers Merck & Co. (MRK) and Pfizer (PFE), which are trading at PEs of 15.7x and 12.4x, respectively.

Forward EV-to-EBITDA

On a capital structure–neutral and excess cash–adjusted basis, Bristol-Myers Squibb is currently trading at ~15.2x, much higher than the industry average of ~10.5x. Other competitors Eli Lilly, Merck & Co., and Pfizer have forward EV-to-EBITDA multiples of 14.1x, 10.5x, and 10.6x, respectively.

Analysts’ recommendations

According to data released on July 28, 2017, Bristol-Myers’s stock value has fallen ~25.9% over the last 12 months. Analysts expect the stock’s price to improve ~3.5% over the next 12 months. Analysts’ recommendations show a 12-month target price of $57.23 per share for the stock, compared to its price of $55.27 per share on July 28, 2017.

Of the 23 analysts covering Bristol-Myers Squibb, ten have recommended “buys,” ten have recommended “holds,” and three have recommend “sells” on the stock. The consensus rating for Bristol-Myers Squibb is 2.43, which represents a moderate “buy” for value investors.

To divest company-specific risks, investors can consider ETFs such as the Vanguard Healthcare ETF (VHT), which holds 2.6% of its total assets in Bristol-Myers Squibb. VHT also holds 5.5% of its total assets in Pfizer, 4.9% in Merck & Co., and 2.3% in Eli Lilly.

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