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Medical technology major Becton, Dickinson and Company (BDX - Analyst Report) posted adjusted earnings per share of $1.42 for the first quarter of fiscal 2014, topping the Zacks Consensus Estimate of $1.29 as well as the year-ago earnings of $1.35 by 5.2%.

Adjusted earnings exclude medical device excise tax that came into effect in January 2013. Reported earnings per share increased 1.5% to $1.37 from $1.35 per share in the fiscal 2013 quarter.

Revenues in the quarter went up 6.1% to $2,015 million, also exceeding the Zacks Consensus Estimate of $1,979 million. In constant currency, revenues grew 6.7% in the quarter. The increase in revenues was attributable to favorable timing of orders in the BD Medical and BD Diagnostics segments.

Operating income fell 3.6% to $378 million from $392 million in the first quarter of fiscal 2013. Consequently, operating margin declined 180 basis points (bps) to 18.8% from 20.6% a year ago.

Revenues in the U.S. went up 2.3% to $849 million. International revenues grew 8.9% to $1.17 billion in the quarter, driven by continued strength in emerging markets and sales of safety-engineered products apart from strong growth in Western Europe.

Segments in Detail

Revenues in the BD Medical segment rose 8.2% (8.6% on a constant currency basis) globally to $1.06 billion, due to strong medical surgical systems, diabetes care, and pharmaceutical systems sales. Both the medical surgical and pharmaceutical systems were positively affected by favorable timing of orders.

Global revenues in the BD Diagnostics segment scaled up 3.1% (4.2% in constant currency) to $672 million, due to international expansion in both the preanalytical systems and diagnostic systems businesses. The growth in diagnostic systems was favorably affected by timing of flu orders.

Revenues in the BD Biosciences swelled 5.4% (5.7% in constant currency) to $279 million globally, on the back of continued strength in emerging markets, clinical reagents sales and solid instrument placements in both the U.S. and Western Europe.

Fiscal 2014 Guidance

For fiscal 2014, Becton, Dickinson continues to expect revenue growth in the range of 4.0 to 5.0%, both in reported and constant currency. The company also anticipates adjusted earnings per share between $6.19 and $6.22 for the year (compared with the prior range of $6.16 to $6.22), reflecting a year-over-year growth of 6.5–7.0% over fiscal 2013. The current Zacks Consensus Estimate of $6.21 lies within the guided range.

In constant currency, adjusted earnings per share are now anticipated to grow between 9.0 and 9.5%, or between 9.5 and 10.0% excluding the incremental impact of the medical device tax. Becton Dickinson maintained its plan to repurchase about $450 million of its common stock in fiscal 2014.

Our Take

Becton, Dickinson continues on a positive note with its first quarter and fiscal 2014 results exceeding expectations on both fronts. While the domestic market is largely penetrated, the company’s robust growth in the international markets is a material upside. Further, penetration in emerging markets should bolster the top line for Becton Dickinson.

However, Becton, Dickinson faces a wide range of competitors in each of its three business segments. It faces different groups of highly-focused competitors in each market in which its products are sold.

Currently, Becton, Dickinson currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical/dental supply industry include Align Technology Inc. (ALGN - Analyst Report), Cardinal Health, Inc. (CAH - Analyst Report), and Uroplasty, Inc. (UPI - Snapshot Report). All of them carry a Zacks Rank #2 (Buy).

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