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Should Investors Buy Bristol Myers Squibb Stock?

Healthcare has been the second-best performing S&P 500 sector in the last decade – and over the last three years, only behind the tech sector.

Therefore, it should play a key role in investment portfolios for the long term and as the economy slows down.

Let’s take a look at a healthcare stock Investors may want to consider buying.

Bristol Myers Squibb BMY

Bristol Myers Squibb is one of the leading global specialty biopharmaceutical companies focused on the development of treatments targeting serious diseases such as cancer. Bristol Myers has a strong oncology portfolio that includes its well-known drug Opdivo, Revlimid, Pomalyst, Sprycel, Yervoy, and Empliciti.

Outside of Oncology, Bristol Myers Squibb has important drugs for immunology and cardiovascular diseases. The company’s diversified portfolio of treatments for a variety of diseases has led to continued growth over the last decade. The company also acquired Celgene Corporation in 2019.

After acquiring Celgene, Bristol Myers Squibb has increased its drug pipeline to address patients’ needs for cancer, inflammatory, immunologic, and fibrotic treatments.

Performance

Year to date, BMY is up +12% to crush the S&P 500’s -25% decline. BMY’s YTD performance indicates the stock has been a viable hedge against inflation because people can ill afford to cut back on health-focused spending.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

BMY stock is up +8% in the last five years. But it is now up +18% in the past two years to surpass the benchmark and blast away its Medical-Biomedical and Genetics Markets -42% decline.

Outlook

Bristol Myers has clearly shown itself as an industry leader and the trend looks set to continue. Earnings growth is projected to essentially be flat this year at $7.50 a share, but FY23 earnings are expected to be up 8%. Sales are projected to be down 1% this year but climb 4% in FY23 at $47.76 billion, based on Zacks estimates.

The cost of acquiring Celgene was pricey at $74 billion, a 53% premium to the price of Celgene’s stock at the time. However, the boost in revenue has already been reflected in Bristol Myers earnings. Through the acquisition, Bristol Myers gained access to Revlimid, used to treat Multiple Myeloma cancer and one of the world’s top-selling drugs.

Although Revlimid’s revenue was down 22% during the second quarter, the drug still brought in $2.5 billion in revenue. Plus, BMY’s annual earnings were up 62% in 2020 after the Celgene acquisition and another 9% in FY21 at $46.38 billion.

Growth of Eliquis

The growth of Bristol Myer’s top-selling drug Eliquis remains impressive and has been well noted by analysts and the medical community. Eliquis, which is used in the treatment of blood clots continued to show growth during the second quarter. Eliquis revenue climbed 16% to $3.2 billion. Although Bristol Myers must share 50% of Eliquis earnings with Pfizer PFE due to regulations, the drug still accounted for 27% of the company’s revenue during the second quarter.

Eliquis was fifth in worldwide drug sales in 2021, with Pfizer’s Covid-19 vaccine Comirnaty topping the list. Eliquis drug sales were $16.75 billion last year and the continued growth has many believing it may become the top-selling drug in the world.

The need to treat blood disorders will remain constant, unlike the uncertain outlook and necessity for Covid-19 vaccines and boosters. This makes Bristol Myers stock very intriguing for longer-term investors to consider as Eliquis and its diverse oncology drugs are well positioned for the future.

Valuation

Trading around $70 a share, BMY has a P/E of 9.4X which is lower than the industry average of 19.2X. This is also near its median of 8.9X over the last two years and below the high of 10.5X.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

BMY is also much more attractively valued compared to its Medical-Biomed/Genetics Market with an average P/E of 62.8X. Plus, BMY is expected to have 6% earnings growth over the next five years.

And Bristol Myers’s price to sales at 3.2X is considerably lower than the industry average of 9.4X.

Bottom Line

BMY currently lands a Zacks Rank #3 (Hold) and its Medical-Biomedical and Genetics Industry is in the top 34% of over 250 Zacks Industries. Investors may want to consider holding the stock for its diversified drug portfolio. The growth of Bristol Myers blood thinner drug Eliquis continues to be impressive and could lead to massive earnings in the future.

Bristol Myers also offers a solid dividend for patient investors with an annual dividend yield of 3.04% at $2.16 a share. BMY has raised its dividend in each of the last five years and the average Zacks Price Target suggests 11% upside from current levels.


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