BMY vs GSK: Priced In Growth vs. Undervalued Stability

The core question for Bristol Myers Squibb is whether its growth story is already fully priced in. The numbers show a company delivering on its operational plan, but the market's reaction suggests expectations have been reset lower. In the third quarter, BMY posted revenue of $12.2 billion, up 3% year-on-year, driven by its newer products. Yet the profit picture was mixed, with adjusted EPS falling 9.4% year over year to $1.63. This is the classic setup: growth is real, but profitability is under pressure, creating an expectation gap.

That gap is starkly visible in the stock's performance. Over the past year, BMY shares have declined 18.9%, a brutal underperformance against the S&P 500's nearly 18.1% rally. This isn't just a sector dip; it's a clear signal that the market has lowered its growth expectations for the company. The stock's pop on the Q3 report was a classic "buy the rumor" reaction to a beat, but it quickly faded as the reality of the guidance and the broader context set in.

The real tension, however, comes from the sky-high analyst projections that now need to be met. For the full fiscal year ending in December, analysts are projecting adjusted EPS of $6.53. That represents a surge of 467.8% from $1.15 in fiscal 2024. This is a massive "beat and raise" scenario baked into the forward view. The company itself raised its full-year EPS guidance to a range of $6.40 to $6.60, which is ambitious but still within that analyst range. The expectation now is that BMY must not only grow revenue but also dramatically improve its profitability to justify that leap.

Viewed another way, the market's skepticism is a form of expectation arbitrage. It's saying the current stock price already reflects a more modest growth trajectory. For the stock to rally meaningfully, BMY will need to consistently beat these elevated consensus numbers, starting with its upcoming Q4 report. The recent underperformance shows the bar is high; the company's growth must not just be real, it must be spectacularly better than what's priced in.

GSK's Steady Engine: Guidance and the "Buy the Rumor" Trap

While BMY grapples with a massive expectation gap, GlaxoSmithKline presents a different puzzle: a steady engine trading at a discount. The company's Q3 2025 results show consistent execution, with total sales reaching £8.5 billion, up 7% on an annualized exchange rate basis. The growth was broad-based, but specialty medicines were the standout, surging 16% to £3.4 billion. This predictable expansion, coupled with a raised full-year guidance, suggests the market may be underestimating the stability of GSK's core business.

The valuation disconnect is clear. Despite this operational momentum, the stock trades at a 19.7% downside to its average analyst price target of $38.71. That gap implies guidance is too conservative or that the market is pricing in a slower growth trajectory than the company is delivering. It's a classic setup for an expectation reset, but in reverse. The market consensus appears to be pricing in a more modest future, while GSK's actual performance and raised outlook point to better results.

This creates a potential "buy the rumor" opportunity if the company's pipeline catalysts later in 2026 materialize. GSK has several key milestones ahead, including a US decision on its asthma drug depemokimab expected in December. The company also highlighted 15 scale opportunities with potential peak sales over £2 billion launching through 2031. If these catalysts drive a beat-and-raise in the coming quarters, the current valuation gap could close rapidly.

The contrast with BMY is instructive. Where BMY's stock is under pressure because its growth may not be spectacular enough, GSK's stock is pressured because its growth may be too steady. The market's skepticism toward GSK's guidance suggests the bar for a positive surprise is low. For investors, this sets up a different kind of expectation arbitrage: buying the rumor of pipeline success at a price that already reflects a cautious view.

Catalysts and Risks: What's Next for the Expectation Reset

The near-term catalysts for both companies will test the expectation gaps that have defined their recent moves. For Bristol Myers Squibb, the immediate event is its fiscal Q4 2025 results, set for release on Feb. 5. The market consensus is for an adjusted EPS of $1.65, a slight dip from the prior year. The risk here is a classic "sell the news" dynamic. After a strong Q3 beat that sent shares up 7%, the stock's subsequent decline suggests any miss on this low bar could trigger a swift reset. The real pressure, however, is on the full-year outlook. With analysts projecting a 467.8% surge in adjusted EPS to $6.53 for fiscal 2025, the Q4 print is just one step in a massive expectation climb. The company must show that its newer products are not just growing, but doing so at a pace that can offset legacy declines and justify that leap.

GlaxoSmithKline's catalysts are more spread out but potentially more transformative. The first major near-term event is the US decision on its asthma drug depemokimab, expected in December 2025. This is a binary event that could validate or challenge the market's cautious view of GSK's pipeline. A positive ruling would be a direct catalyst for the stock, which currently trades at a 19.7% discount to its average analyst price target. The broader narrative, however, is the pipeline of 15 scale opportunities with potential peak sales over £2 billion launching through 2031. Execution on these R&D investments is the core risk. The company has already raised its full-year guidance, but sustaining that momentum requires translating clinical progress into commercial success.

The bottom line is that both companies are set up for an expectation reset, but in opposite directions. BMY must prove its growth is not just real, but spectacularly better than the whisper number for the full year. GSK must prove its steady engine is about to accelerate, closing the valuation gap. For investors, the key is to watch these catalysts not for their standalone news, but for how they shift the forward view relative to what's already priced in.