Bristol-Myers Squibb: Q2 Earnings Look Like An Inflection Point

Investment Thesis - Bristol-Myers Squibb (BMY) reported strong Q2 earnings, leading to an 11% stock rally, with significant revenue and EPS surprises [1] - The company exhibits exceptional profitability, enabling growth through acquisitions, innovation, and shareholder returns, with a forward dividend yield of 5% [1] - Valuation analysis indicates that BMY remains undervalued despite recent price increases, leading to a "Strong Buy" recommendation [1] Company Information - BMY is a leading biopharmaceutical company focused on developing medicines for severe diseases, with flagship products Eliquis and Opdivo accounting for approximately 47% of total sales in FY 2023 [2] Financial Performance - BMY's revenue for FY 2023 was $45,006 million, showing a decline from $46,159 million in FY 2022, but still reflecting a strong financial history with a 12.3% CAGR over the last decade [5][6] - The company reported a gross profit margin of 76.6% and a free cash flow margin of 29.5% in FY 2023, indicating strong profitability metrics [6][8] Q2 Earnings Review - In Q2 2024, BMY's revenue grew by 8.9% year-over-year, with flagship products Eliquis and Opdivo showing robust growth [10] - Management raised full-year guidance based on strong Q2 performance, indicating confidence in achieving upper-end revenue growth targets [11][12] Market Position - BMY commands a leading global market share in oncology drugs, with significant investments in R&D expected to support future growth [4][12] - The oncology drug market is projected to grow at an 11.3% CAGR over the next decade, which aligns with BMY's strategic focus [12] Valuation - BMY's stock is considered undervalued, with a fair value estimated at $70, representing a 39% upside potential [17] - The company has a high valuation grade of "A+" from Seeking Alpha, indicating that its ratios are significantly lower than sector medians [13][14] Dividend Policy - BMY maintains a strong dividend policy, with a forward dividend yield of around 5%, supported by a healthy free cash flow margin [8][17]