Given its higher valuation, we imagine that Bristol Myers Squibb inventory (NYSE: BMY) is at the moment a greater choose than its peer – AbbVie stock (NYSE:ABBV). BMY inventory trades at a a lot decrease a number of of two.2x revenues, versus 6.2x for ABBV. This may be attributed to the latter’s superior income progress and profitability. Nonetheless, we predict this hole in valuation will slender in favor of Bristol Myers Squibb within the coming years. There’s extra to the comparability, and within the sections beneath, we talk about why we predict Bristol Myers Squibb will outperform AbbVie within the subsequent three years. We evaluate a slew of things, comparable to historic income progress, returns, and valuation in an interactive dashboard evaluation – Bristol Myers Squibb vs. AbbVie – components of that are summarized beneath.
1. ABBV Inventory Has Fared A lot Higher Than BMY
BMY inventory has seen little change, transferring barely from ranges of $55 in early January 2021 to round $50 now, vs. a rise of about 115% for ABBV, transferring from $90 to $195 over the identical interval. Compared, the S&P500 index has seen 50% progress over this era.
The efficiency of those shares with respect to the index has been fairly risky. Returns for BMY inventory had been 3% in 2021, 19% in 2022, and -26% in 2023, whereas that for ABBV had been 32%, 24%, and 0%, respectively. Compared, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that BMY underperformed the S&P in 2021 and 2023 and ABBV underperformed the S&P in 2023.
In truth, persistently beating the S&P 500 — in good occasions and unhealthy — has been tough over current years for particular person shares; for heavyweights within the Well being Care sector together with JNJ, PFE, and UNH, and even for the megacap stars GOOG, TSLA, and MSFT. In distinction, the Trefis High Quality (HQ) Portfolio, with a set of 30 shares, has outperformed the S&P 500 annually over the identical interval. Why is that? As a gaggle, HQ Portfolio shares supplied higher returns with much less threat versus the benchmark index; much less of a roller-coaster journey as evident in HQ Portfolio efficiency metrics.
2. AbbVie Has Seen Higher Income Progress
Bristol Myers Squibb’s income rose at a mean annual price of 2% from $42.5 billion in 2020 to $45 billion in 2023, whereas AbbVie’s income grew at a mean price of 6.5% from $45.8 billion to $54.3 billion over this era.
Bristol Myers Squibb’s income progress was pushed by the market share positive factors for a few of its medication, together with its anticoagulant – Eliquis. Nevertheless, falling gross sales of Revlimid amid biosimilar competitors has offset a few of these positive factors. Whereas the corporate expects Revlimid gross sales to proceed to erode, a few of its newer medication, comparable to Camzyos, Sotyktu, and Opdualag, are anticipated to garner gross sales of over $1 billion every by 2026. The corporate can be inorganic progress to bolster its gross sales and earnings progress. It accomplished three acquisitions this 12 months – Mirati Therapeutics, RayzeBio, and Karuna Therapeutics.
AbbVie’s income progress has been buoyed by its Allergan acquisition in 2020. The corporate is greatest recognized for its blockbuster drug – Humira – used to deal with rheumatoid arthritis and Crohn’s illness, amongst others. Humira’s gross sales peaked at $21.2 billion in 2022, earlier than falling 32.2% y-o-y to $14.4 billion in 2023. This may be attributed to the biosimilar competitors.
AbbVie, to some extent, can fight the lack of income from Humira by market share positive factors for a few of its comparatively new medication, primarily Skyrizi, and Rinvoq. These medication are used to deal with plaque psoriasis and rheumatoid arthritis. For perspective, these two merchandise garnered $11.7 billion in 2023, reflecting a strong 53% y-o-y progress. The gross sales of its anti-depressant – Vraylar – additionally spiked 35% y-o-y to $2.8 billion in 2023. For the six-month interval ending June 2024, Skyrizi and Rinvoq continued their market share positive factors, with gross sales rising 50% y-o-y to over $7 billion.
AbbVie can be inorganic progress. After its acquisition of Allergan in 2020, it acquired ImmunoGen for $10.1 billion this 12 months, giving it rights to Elahere — an ovarian most cancers therapy – with estimated peak gross sales of over $2 billion.
Trying ahead, we count on each Bristol Myers Squibb and AbbVie’s gross sales to rise at a mid-single-digit common price for the subsequent three years.
3. AbbVie Is Extra Worthwhile
Bristol Myers Squibb’s reported working margin improved from 5.1% in 2020 to 18.2% in 2023, whereas that for AbbVie contracted from 27.8% to 24.9% over this era. Trying on the final twelve months interval, AbbVie’s working margin of 24.9% fares significantly better than 15.2% for Bristol Myers Squibb. Notably, Bristol Myers Squibb’s adjusted earnings are anticipated to be round $0.75 in 2024, reflecting a major drop from $7.51 it reported final 12 months. This may be attributed to expenses associated to the acquisitions this 12 months. We count on the earnings to rebound to $6.90 in 2025.
4. AbbVie Fares Higher In Phrases of Monetary Danger
monetary threat, we imagine AbbVie has an edge over Bristol Myers Squibb. Its 20% debt as a share of fairness is decrease than 52% for Bristol Myers Squibb. Additionally, its 9% money as a share of belongings is increased than 7% for the latter. This suggests that AbbVie has a greater debt place and extra cash cushion.
5. The Web of It All
We see that AbbVie has seen higher income progress, is extra worthwhile, and provides decrease monetary threat than Bristol Myers Squibb. Now, prospects, we imagine BMY is the higher alternative of the 2, given its engaging valuation. At its present ranges, BMY inventory is buying and selling at 2.2x revenues, versus its common P/S ratio of two.5x seen over the past three years. Compared, at its present ranges of round $195, AbbVie inventory trades at 6.2x revenues, versus its common P/S ratio of 4.5x over the past three years. This suggests that BMY inventory has some room to develop, whereas ABBV inventory appears totally priced, in our view.
Though there are near-term headwinds for Bristol Myers Squibb, primarily for Revlimid, they appear to be already priced in. Its long-term progress prospects look strong, with its new medication portfolio anticipated to see a major rise in gross sales over the approaching years. The corporate ought to have the ability to increase its pipeline by its new acquisitions of Mirati, Karuna, and RayzeBio.
| Returns | Sep 2024 MTD [1] |
2024 YTD [1] |
2017-24 Whole [2] |
| BMY Return | 2% | 3% | 12% |
| ABBV Return | -1% | 28% | 332% |
| S&P 500 Return | 1% | 20% | 155% |
| Trefis Strengthened Worth Portfolio | 1% | 15% | 761% |
[1] Returns as of 9/25/2024
[2] Cumulative complete returns for the reason that finish of 2016
Make investments with Trefis Market-Beating Portfolios
See all Trefis Price Estimates
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
