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Ready to Make Passive Income? Consider Buying This Health Care Stock

Leading biopharmaceutical company Bristol-Myers Squibb (BMY) reported solid financials in the last quarter. Its diversified product portfolio and inelastic demand for such products brighten its near-term prospects. Moreover, the company’s strong financials put it in a great position to pay dividends increasingly. Hence, it could be an ideal pick for investors looking for long-term capital appreciation and a steady income stream. Read on…

Bristol-Myers Squibb Company (BMY) discovers, licenses, manufactures, and markets biopharmaceutical products worldwide. The company provides a wide range of products for hematology, cardiovascular, oncology, fibrotic, immunology, fibrotic, neuroscience, and covid-19 diseases. It sells its products to wholesalers, pharmacies, retailers, hospitals, clinics, distributors, and government agencies.

On October 4, BMY entered into an agreement with Autolus Therapeutics plc (AUTL), a clinical-stage biopharmaceutical company developing next-generation programmed T-cell therapies. Under the agreement, BMY would receive access to AUTL’s RQR8 safety switch for cell therapy programs on a target-by-target basis for cancer treatment.

In September, BMY received approval from European Commission for LAG-3-Blocking Antibody Combination, Opdualag (nivolumab and relatlimab), for the treatment of unresectable or metastatic melanoma with tumor cell PD-L1 Expression < 1%. This approval would enable the treatment of all adults and adolescents above 12 years of age in all European Union member states, as well as Iceland, Liechtenstein, and Norway.

In addition, in the same month, BMY announced adjuvant treatment with Opdivo (nivolumab) demonstrated a statistically significant and clinically meaningful improvement in recurrence-free survival (rfs) in patients with Stage IIB/C Melanoma in the CheckMate -76K Trial.

Also, in August, BMY completed its acquisition of Turning Point Therapeutics, Inc., in an all-cash transaction. Elizabeth Mily, BMY’s Executive Vice President, Strategy & Business Development, said, “Turning Point has distinguished itself in the field of precision oncology, and this acquisition will further strengthen our leading oncology franchise.”

The drugmaker is known for paying high-yield dividends. BMY has raised its dividend payments for six consecutive years. On September 14, BMY declared a quarterly dividend of $0.54 per share, which would be paid out on November 1. It pays a $2.16 per share dividend annually, which translates to a 2.96% yield on the current price. Its four-year dividend yield is 3.04%.

The company’s dividend payouts have grown at a CAGR of 9.6% over the past three years and 6.7% over the past five years.

BMY’s stock has gained 18% year-to-date and 26.3% over the past year to close the last trading session at $72.99.

Here is what could influence BMY’s performance in the upcoming months:

Robust Financials

For the fiscal 2022 second quarter ended June 30, 2022, BMY’s revenue increased 1.6% year-over-year to $11.89 billion. The company’s non-GAAP net earnings grew 13.2% from the prior-year period to $4.15 million, while its non-GAAP EPS came in at $1.93, up 18.4% year-over-year.

Favorable Analyst Estimates

Analysts expect BMY’s EPS for the fiscal 2023 first quarter (ending March 2023) to come in at $2.03, representing an increase of 3.4% from the prior-year period. The consensus revenue estimate of $11.72 billion for the same quarter indicates a marginal year-over-year increase. The company has surpassed the consensus EPS estimates in each of the trailing four quarters.

Furthermore, the company’s EPS and revenue for the fiscal year 2023 (ending December 2023) are expected to rise 5.5% and 3.1% year-over-year to $47.45 billion and $7.95, respectively.

Discounted Valuation

In terms of forward non-GAAP P/E, BMY is currently trading at 9.69x, 46.7% lower than the industry average of 18.15x. The stock’s forward EV/EBITDA multiple of 9.01 is 30.6% lower than the industry average of 12.99. Also, its forward EV/EBIT of 9.67x is 40.5% lower than the industry average of 16.25x.

In addition, in terms of forward Price/Sales, the stock is currently trading at 3.39x, 20.1% lower than the industry average of 4.24x. Its forward Price/Cash Flow multiple of 9.84 is 38.4% lower than the 15.97 industry average.

High Profitability

BMY’s trailing-12-month gross profit margin of 79.76% is 46.4% higher than the 54.49% industry average. Its trailing-12-month EBITDA margin of 44.83% is 1,261.7% higher than the 3.29% industry average. Likewise, the stock’s trailing-12-month net income margin of 14.04% compares to the industry average of negative 2.85%.

Furthermore, BMY’s trailing-12-month ROCE, ROTC, and ROTA of 19.07%, 8.32%, and 6.59% compare to the industry averages of negative 38.67%, 21.39%, and 29.59%, respectively.

POWR Ratings Show Promise

BMY has an overall A rating, translating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. BMY has an A grade for Value, consistent with its lower-than-industry valuation metrics. Also, it has a grade of B for Quality, in sync with its higher-than-industry profitability metrics.

BMY is ranked #2 out of 161 stocks in the Medical-Pharmaceuticals industry.

Beyond what I have stated above, we have also given BMY grades for Sentiment, Growth, Momentum, and Stability. Get access to all BMY ratings here.

Bottom Line

BMY reported solid fiscal 2022 second-quarter financials and looks well-positioned to benefit from its research breakthroughs, strategic partnerships, and acquisitions. The drugmaker's shares are trading above their 50-day and 200-day moving averages of $70.94 and $72.06, indicating an uptrend.

Given its promising growth prospects, discounted valuation, high profitability, and attractive dividends, it could be an ideal investment for a passive income stream and long-term capital appreciation.

How Does Bristol-Myers Squibb Company (BMY) Stack Up Against its Peers?

BMY has an overall POWR Rating of A. One could also check out these other stocks within the Medical-Pharmaceuticals industry with an A (Strong Buy) rating: Roche Holding AG ADR (RHHBY), Merck & Co. Inc. (MRK), and Novartis AG ADR (NVS).

BMY shares were trading at $72.79 per share on Tuesday morning, down $0.20 (-0.27%). Year-to-date, BMY has gained 20.37%, versus a -18.28% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.


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