We Think Bristol-Myers Squibb's (NYSE:BMY) Healthy Earnings Might Be Conservative

Bristol-Myers Squibb Company's (NYSE:BMY) solid earnings announcement recently didn't do much to the stock price. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

Check out our latest analysis for Bristol-Myers Squibb

The Impact Of Unusual Items On Profit

To properly understand Bristol-Myers Squibb's profit results, we need to consider the US$1.7b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Bristol-Myers Squibb to produce a higher profit next year, all else being equal.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Bristol-Myers Squibb's Profit Performance

Because unusual items detracted from Bristol-Myers Squibb's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Bristol-Myers Squibb's statutory profit actually understates its earnings potential! And the EPS is up 31% over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Bristol-Myers Squibb and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Bristol-Myers Squibb's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.