Normally, planned layoffs are a good thing for a stock. Shares go up as companies cut costs and demonstrate they have the fortitude to make the tough calls. While the human cost is often devastating, today it proved just as devastating for pharmaceutical stock Bristol-Myers Squibb (NYSE:BMY). Shares were down over 8% in Thursday afternoon’s trading after the layoff plans were announced.
Bristol-Myers declared the plan the “Strategic Productivity Initiative” and will lay off around 2,200 employees over the course of this year to kick off a cost-cutting operation that will produce around $1.5 billion in savings by the end of 2025.
That money, meanwhile, will be plowed back into operations, with key plans to “…fund innovation and drive growth.” So, who’s on the block? Management layers, for the most part, are looking to take cuts, along with “…third-party expenditures.”
The Earnings Called for a Plan
With Bristol-Myers’ earnings report showcasing a loss of $5.89 per share in the first quarter, as well as a string of one-time costs thanks to recent acquisitions at a time when some of its marquee drugs were facing troubles—its cancer therapy, Opdivo, was particularly under fire—it was clear something had to be done. It wasn’t all trouble, though; its blood cancer treatment Revlimid and its blood thinner Eliquis both saw much better than expected results.
But with the spending spree from acquisitions and troubles elsewhere, some kind of reclamation effort had to take place to turn around a somewhat mixed balance sheet. That $5.89 per share loss came even as revenue beat expectations, after all.
Is Bristol-Myers a Buy or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on BMY stock based on three Buys, 11 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 30.91% loss in its share price over the past year, the average BMY price target of $54.08 per share implies 20.88% upside potential.
BMY also pays out a quarterly dividend, which yields 4.71%. This is above the healthcare sector (XLV) average of 1.5%.
Is BMY the Right Stock to Buy for Passive Income?
Before you hurry to invest in BMY, think about the following:
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