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A Fast-Growing 3.2% Yielding Blue-Chip With 300% Total Return Potential In The Coming Years | The Mesh Report

A Fast-Growing 3.2% Yielding Blue-Chip With 300% Total Return Potential In The Coming Years

Dividend Sensei June 12, 2020 Comments Off on A Fast-Growing 3.2% Yielding Blue-Chip With 300% Total Return Potential In The Coming Years

Bristol-Myers (BMY) is one of the Dividend Kings’ highest conviction blue-chip buy ideas right now.

Bullish Thesis

This pharma giant has been accelerating profit growth in recent years due to its increasing focus on specialty-drugs, specifically high-margin oncology and cardiovascular drugs.

The Celgene acquisition, which closed in late 2019, was so immediately accretive to EPS that this year management is guiding for about 30% EPS growth while analysts expect even stronger earnings growth in the coming years.

  • 2020 EPS growth consensus: +32%
  • 2021 EPS consensus: +19%
  • 2022 EPS consensus: +7%
  • 5-year growth consensus: 17.9% CAGR

Risks To Consider

Bristol is increasing its focus on branded drugs by selling off unrelated business lines, which elevates its exposure to patent losses. Further, the increased branded drug focus raises the company’s dependence on its pipeline.

This will result in higher sales volatility than observed at its more diversified peers. Additionally, the company is exposed to risks facing the entire pharmaceutical group, including generic threats, decreasing pricing power owing to managed-care constraints, and product liability cases.

From a product-specific standpoint, we believe the company’s largest pipeline risk surrounds its immunotherapy drugs, which could develop into major blockbusters or fail in the market, depending on clinical data.

Further, the risk of competitors such as Merck and Roche taking more market share in immunotherapy is rising as other companies are catching up, particularly in combination therapy.

Lastly, the recent move to acquire Celgene adds financial risk due to the large amount of debt needed to finance the deal. Overall, we view the company’s uncertainty as medium.” – Damien Conover, Morningstar

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