) Q1'11 earnings are expected to decline YoY due to higher operational costs combined with the impact of healthcare reform and Avalide supply issues. Whilst the strong new product launches and catalyst set command a premium valuation versus its peers, the shares are fairly valued in Jefferies view. Jefferies forecasts Q1'11E revenues to grow 4% to $5.0bn with an estimated +1% FX benefit. It models a slightly lower gross margin of 73.3% versus 73.5% in Q1'10. Jefferies anticipates higher R&D costs, as well as MS&A and A&P costs. As a result, Jefferies expects that the operating margin will decline by 137bps to 31.5% compared to 32.8% in Q1'10. After assuming a slightly higher tax rate of 25.5% versus 24.8% in Q1'10, it expects Q1'11E EPS to decline by 9% YOY to $0.51. With improved clarity on the 2011 revenue stream, Healthcare Reform excise fee, new product launches, and FX movements, management could provide an update to their current guidance of low to mid single-digit growth and diluted Non-GAAP EPS of $2.10-$2.20. Jefferies current estimate is $2.20. Jefferies has a $28.50 PT and Hold rating on BMY BMY is trading higher at $27.88