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Bristol-Myers Squibb’s Valuations after Its 3Q17 Earnings

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Bristol-Myers’s valuation

Bristol-Myers Squibb missed analysts’ estimates for earnings per share (or EPS) in 3Q17. The company reported EPS of $0.75 against estimates of $0.77 for 3Q17. 

However, Bristol-Myers Squibb surpasses the estimates for revenues and reported revenues of ~$5.3 billion compared to estimates of ~$5.2 billion during 3Q17.

The chart above compares analysts’ estimates and actual EPS since 4Q15. We can assess Bristol-Myers Squibb via several valuation multiples.

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Forward PE

Price-to-earnings (or PE) multiples represent what one share can buy for an equity investor. On October 31, 2017, Bristol-Myers Squibb (BMY) traded at a forward PE multiple of ~18.9x, compared to the industry average of 13.9x. 

Among its competitors, Eli Lilly & Co. (LLY), Merck & Co. (MRK), and Pfizer (PFE) are trading at a forward PE of 18.1x, 13.5x, and 12.9x, respectively.

Forward EV-to-EBITDA

On a capital structure–neutral and excess cash–adjusted basis, Bristol-Myers Squibb currently trades at ~16.1x, which is much higher than the industry’s average of ~10.6x. 

Among its competitors, Eli Lilly & Co. (LLY), Merck & Co. (MRK), and Pfizer (PFE) have forward EV-to-EBITDA multiples of 13.5x, 10.0x, and 10.6x, respectively.

Analyst recommendations

As of October 31, 2017, Bristol-Myers Squibb’s stock value has risen ~19.3% over the last 12 months, and it has risen 4.1% year-to-date. Analysts estimate that the stock price could rise ~3.9% over the next 12 months. 

Analysts’ recommendations show a 12-month targeted price of $63.24 per share compared to its previous price of $60.84 per share on October 30, 2017.

Of the 22 analysts covering Bristol-Myers Squibb, nine analysts recommend a “buy,” 11 analysts recommend a “hold,” and two analysts recommend a “sell.” The consensus rating for Bristol-Myers Squibb is ~2.5, which represents a moderate buy for value investors.

The First Trust NASDAQ Pharmaceuticals ETF (FTXH) holds 4.6% of its total assets in Bristol-Myers Squibb (BMY). FTXH also holds 4.1% in Eli Lilly & Co. (LLY), 3.9% in Merck & Co. (MRK), and 8.3% in Pfizer (PFE).

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