Here’s why Bristol Myers quarter wasn’t enough to change our view on the stock
Bristol Myers Squibb ‘s beat-and-raise quarter wasn’t enough to change our cautious view on the stock as we await updates on one of its promising drugs. Revenue in the third quarter, ended Sept. 30, rose 3% year over year to $12.2 billion, topping the consensus Street estimate of $11.8 billion, according to LSEG. Adjusted earnings per share fell 9% to $1.63, but outpaced expectations $1.51, according to LSEG. Bristol Myers Squibb Why we own it: The company’s new schizophrenia treatment Cobenfy has major sales potential, though it remains in the early innings. Bristol Myers has key products, such as blood-clot prevention drug Eliquis and lung-cancer therapy Opdivo, which will be coming off patent in the coming years. However, we believe its portfolio of growth drugs, including Cobenfy, can help navigate that patent cliff. Initiation: Nov. 25, 2024 Most recent buy date: Feb. 10, 2025 Competitors: AbbVie , Pfizer , Amgen , Johnson & Johnson , and Merck Bottom line Bristol Myers delivered across the company’s portfolio and raised its revenue outlook for the full year and tightened its EPS guidance. While the legacy portfolio saw sales fall by 12% year over year (or 13% excluding currency fluctuations), the decline was more than offset by 18% year-over-year growth (or 17% excluding currency fluctuations) for the growth portfolio. The results aren’t the issue. The company’s future hinges on the success of Cobenfy, the company’s new schizophrenia drug. While the drug did come up slightly short of expectations, the real test, and next major catalyst for the stock, will be its trial data for Alzheimer’s psychosis. One phase 3 trial update is expected this year, with two additional phase 3 trial readouts expected in 2026. Until then, we don’t know the true long-term growth potential of this potential blockbuster drug. As a reminder, while we are awaiting updates on Cobenfy’s viability as a treatment for Alzheimer’s psychosis, it is already approved for the treatment of schizophrenia in adults. On the earnings call, CEO Chris Boerner commented: “Cobenfy is delivering steady growth as we continue to receive positive feedback from physicians on key indicators, supporting our expectations that this is a meaningful first indication for Cobenfy.” BMY 1Y mountain Bristol Myers Squibb 1-year return Shares of Bristol Myers were up nearly 6% this morning, so we opted to reduce our exposure in what has been a disappointing name. As Jim Cramer discussed this morning, we don’t want to be throwing good money after bad, and despite today’s better-than-expected report, there is no denying that this has been a bad investment thus far. Our sale leaves us with enough of a position to benefit should the Cobenfy updates prove positive, but not so much that a bad readout hurts us much. The now greater than 5.5% dividend yield will also reward us for our patience and should provide a solid basis for support around current levels. We reiterate our 2 rating and are reducing our price target to $50 from $55. Results Guidance The company raised its 2025 guidance on several metrics, but it doesn’t reflect the impact of the Orbital Therapeutics acquisition, which was announced after the close of the reported quarter and is expected to close in the current (fourth) quarter. Management is now forecasting full-year sales to be in the range of $47.5 billion to $48 billion, up from $46.5 to $47.5 billion range previously provided, compared to the LSEG consensus estimate of $47.33 billion. Other income guidance was also revised higher to about $500 million, up from about $250 million previously, due to higher-than-anticipated royalties and licensing income, as well as favorable interest income. Management reiterated the midpoint of its full-year earnings guidance, but tightened the range to $6.40-$6.60, versus the wider $6.35-$6.65 range previously provided. The LSEG consensus estimate was $6.38 per share. Gross margin, operating expenses, and effective tax rate guidance were all left unchanged at roughly 72%, $16.5 billion, and 18%, respectively. (Jim Cramer’s Charitable Trust is long BMY. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.