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Bristol-Myers Squibb Reduces Its Gross Margin Guidance for 2019

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Gross margin forecasts

In its first-quarter earnings press release, Bristol-Myers Squibb (BMY) revised its GAAP (generally accepted accounting principles) and non-GAAP gross margin guidance for 2019 downward from 70%–71% to 70%.

Analysts expect Bristol-Myers Squibb’s adjusted gross margin to contract 77 basis points YoY (year-over-year) to 70.21% in 2019, to contract eight basis points YoY to 70.13% in 2020, and to expand 177 basis points YoY to 71.90% in 2021.

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Quarterly margin performance

In the first quarter, Bristol-Myers Squibb reported an adjusted gross margin of 68.9%, a YoY fall of 60 basis points. According to the company’s first-quarter earnings conference call, a change in its product mix due to stronger revenue growth of Eliquis coupled with an increased excise tax in Puerto Rico had an unfavorable impact on its gross margin in the quarter. The company, however, benefited from the favorable impact of foreign exchange fluctuations.

Analysts expect Bristol-Myers Squibb’s adjusted gross margin to contract 119 basis points YoY to 70.56% in the second quarter, 69 basis points YoY to 70.58% in the third quarter, and 139 basis points YoY to 70.30% in the fourth quarter of 2019.

Tax rate

In its first-quarter earnings press release, Bristol-Myers Squibb revised its 2019 GAAP effective tax rate downward from its previously projected 15% to 14%. It also reduced its 2019 non-GAAP effective tax rate guidance from 17% to 16%.

Analysts expect Bristol-Myers Squibb’s non-GAAP effective tax rate to fall 72 basis points YoY to 16.33% in 2019 and then to rise 20 basis points YoY to 16.53% in 2020 and 13 basis points YoY to 16.66% in 2021.

In the first quarter, Bristol-Myers Squibb reported an effective tax rate of 13.3%, a YoY fall of 270 basis points. Analysts expect Bristol-Myers Squibb’s non-GAAP effective tax rate to fall 127 basis points YoY to 16.64% in the second quarter, to rise 361 basis points YoY to 15.38% in the third quarter, and to fall 115 basis points YoY to 19.33% in the fourth quarter.

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