BMY and NVS: How Tax Rate and Interest Expenses Stack Up

Tax rate projections

In fiscal 2018, Novartis (NVS) and Bristol-Myers Squibb (BMY) reported an effective tax rate of 17.05% and 9.28%, respectively. In its fourth-quarter earnings investor presentation, Novartis guided for a core tax rate of 16.0% in fiscal 2019. Wall Street analysts have projected the company’s effective tax rate to be 15.89%, 15.91%, and 16.08%, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

According to its fourth-quarter earnings press release excluding the impact of the Celgene acquisition, Bristol-Myers Squibb expects its GAAP and non-GAAP tax rate to be 15% and 17%, respectively, for fiscal 2019. Wall Street analysts have projected the company’s effective tax rate to be 17.07%, 17.07%, and 17.07%, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

BMY and NVS: How Tax Rate and Interest Expenses Stack UpInterest expense projections

Wall Street analysts have projected Novartis’s interest expenses to be $567.48 million, $536.22 million, and $581.44 million, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively, which implies a YoY change of -40.70%, -5.51%, and 8.43% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

Wall Street analysts have projected Bristol-Myers Squibb’s interest expenses to be $45.0 million, $58.33 million, and $68.67 million, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively, which implies a YoY change of -75.41%, 29.63%, and 17.71% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

In its investor presentation, Bristol-Myers Squibb guided for a proforma cash flow of around $13.5 billion and $18.5 billion for fiscal 2020 and fiscal 2023, respectively. According to the company’s fourth-quarter earnings conference call, Bristol-Myers Squibb is focused on deleveraging its balance sheet by using its cash flow. The company aims to attain a pro forma debt-to-EBITDA ratio of less than 2.5x in fiscal 2020 and less than 1.5x in fiscal 2023. These projections, however, assume completion of the Celgene acquisition by the third quarter of 2019.

Next, we’ll discuss Novartis’s growth revenues in greater detail.