Bristol Myers Squibb (BMY): Undervalued Opportunity or Value Trap? A Deep Dive into 2024 Earnings and Fair Value

Fourth Quarter 2024 Highlights:

• Total Revenues: $12.3 billion, an 8% increase from the same period in 2023.
• GAAP Earnings Per Share (EPS): $0.04, a significant decrease from $0.87 in Q4 2023.
• Non-GAAP EPS: $1.67, slightly down from $1.70 in Q4 2023.
• Growth Portfolio Revenues: $6.4 billion, a 21% increase, driven by strong demand for products like Eliquis.

Full-Year 2024 Highlights:

• Total Revenues: $48.3 billion, a 7% increase from 2023.
• GAAP Loss Per Share: $(4.41), compared to earnings of $3.86 in 2023.
• Non-GAAP EPS: $1.15, a significant decrease from $7.51 in 2023.
• Growth Portfolio Revenues: $22.6 billion, a 17% increase, indicating robust performance of newer products.

Key Developments:

• Product Approvals: The U.S. approval of Opdivo Qvantig and the launch of Cobenfy for schizophrenia are expected to contribute to future growth.
• Cost-Saving Initiatives: An expanded strategic productivity initiative aims to deliver approximately $2 billion in additional cost savings by the end of 2027.

2025 Guidance:

• Projected Revenues: Approximately $45.5 billion.
• Non-GAAP EPS: Estimated between $6.55 and $6.85

• Morningstar's Fair Value Estimate (Previously Reported)
  • Morningstar estimated fair value at ~$66 per share (as of late 2024).
  • If their model hasn't changed significantly, it's likely still in that range.
• Price-to-Earnings (P/E) Approach
  • 2025 EPS Guidance: $6.55 - $6.85 (Midpoint: $6.70)
  • BMY's Historical P/E Ratio: ~8-10x
  • Estimated Fair Value (P/E-based):
    • Low End (8x P/E): $6.70 × 8 = $53.60
    • High End (10x P/E): $6.70 × 10 = $67.00
    • Midpoint Estimate: $60.30
• Discounted Cash Flow (DCF) Considerations
  • Given the 7% revenue growth in 2024 and upcoming cost-saving initiatives, a DCF model might align closer to $64 - $66 per share.