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On Sep 25, we have reiterated our Neutral recommendation on Becton, Dickinson and Company (BDX - Analyst Report). We are encouraged by the company’s earnings and revenues beats in the fiscal-2013 third quarter and reiteration of earnings and revenues guidance for fiscal 2013. However, we are concerned about challenging conditions in demand for healthcare products, higher raw material costs and other macroeconomic headwinds faced by the company.

Why Reiterated?

On Aug 1, Becton, Dickinson and Company reported third quarter fiscal 2013 adjusted earnings per share of $1.54, beating the Zacks Consensus Estimate of $1.47 per share and up 1.3% year over year. Revenues were $2,052.7 million, up 3.6% (up 5.1% in constant currency) year over year and marginally ahead of the Zacks Consensus Estimate of $2,050 million.

BDX reiterated its guidance for fiscal 2013. The company expects sales growth for fiscal 2013 in the range of 3.5% to 4% (growth of 5.0% at CER) compared with 4.5% to 5.0% earlier). The company continues to expect reported earnings per share from continuing operations for fiscal 2013 in a band of $5.72−$5.75. The projection implies a year-over-year growth of 6.5%−7.0% (8.5%−9.0% at CER) or 11.0%−11.5% after accounting for the medical device tax implemented in Jan 2013.

Following the release of fiscal-third quarter results, the Zacks Consensus Estimate for 2013 earnings remained the same at $5.75 per share. The Zacks Consensus Estimate for 2014 earnings also remained unchanged at $6.26 per share. With the Zacks Consensus Estimates remaining unchanged, BDX retains a Zacks Rank #3 (Hold).

BD is pursuing a number of key product initiatives. During fiscal 2013, it plans to commercialize over ten new offerings. Further, the company continued to focus on geographical expansion into overseas markets, in particular, emerging markets, which account for about 23% of sales.

However, BDX continues to be challenged by downward pressure on demand for health care products as hospital and lab-testing expenditure remain areas of concern and high unemployment rates in the U.S. have dampened requirement for doctors’ visits. These apart, strong competition and higher costs of raw materials pose threat to the company.

Other Stocks to Look For

Other stocks that are currently performing well in the medical instruments industry include STRAUMANN HLD N AKT (SAUHF) with a Zacks Rank #1 (Strong Buy), and Alphatec Holdings, Inc. (ATEC - Snapshot Report) and Cardinal Health, Inc. (CAH - Analyst Report), both with a Zacks Rank #2 (Buy).

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