Bristol-Myers Grows in the Wrong Places

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Bristol-Myers Squibb (NYS: BMY) recorded another strong quarter, but the revenue growth was at least partially in areas that aren't sustainable.

Sales were up 14% year over year, but 4% of that was due to a weaker dollar which increased foreign sales. Currency movements are something Bristol-Myers has no control over and the dollar continuing to drop is (hopefully) not sustainable.

U.S. sales of Plavix, the company's top-selling drug that it sells with Sanofi (NYS: SNY) , increased 17% over the year-ago quarter. But Plavix will begin to see generic competition in May of next year. Bristol-Myers benefits from increased revenue now, but the higher sales are just raising the cliff from which Bristol-Myers will fall from.

Despite those concerns, the rest of the earnings report looked pretty good. Bristol-Myers' new melanoma treatment, Yervoy, is off to an excellent start, bringing in $95 million during its first quarter on the market.

Sticking with the new drugs that will help deaden the blow from the loss of Plavix, Bristol-Myers and Pfizer (NYS: PFE) plan to submit a marketing application for their anticlotting drug Eliquis later this year.

Despite some recent wins in the clinic and regulatory approvals, Bristol-Myers is sticking with its guidance of at least $1.95 per share in 2013 after Plavix begins to fall. Assuming it hits the minimum, Bristol-Myers is trading at 14.8 times 2013 earnings. I have a hard time seeing investors assigning a much higher premium to the early post-Plavix comeback, so if shares are going to move substantially higher, investors will need to be convinced that Bristol-Myers can make more than $1.95 per share in 2013.

That, or be content with the 4.6% dividend yield until the growth starts happening -- whenever that might be. The yield is substantially higher than its peers', including Pfizer, Johnson & Johnson (NYS: JNJ) , and Abbott Labs (NYS: ABT) .

And if that's not your cup of tea, Motley Fool analysts have a free report that offers up 13 more high-yielding stocks you can buy today.

At the time this article was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Abbott Laboratories and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Pfizer, Johnson & Johnson, and Abbott Laboratories. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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