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Medical technology major Becton, Dickinson and Company (BDX - Analyst Report) reported fiscal 2014-second-quarter adjusted earnings per share from continuing operations of $1.53, reflecting a 10.1% rise (or 15.8% in constant currency) over the prior-year earnings of $1.39. Adjusted earnings per share also beat the Zacks Consensus Estimate by 3 cents.

The company reported net earnings of $287 million, up 4.0% from $276 million reported a year ago. Net earnings per share increased 4.3% to $1.45 from $1.39 in the prior-year quarter.

Revenues

Becton, Dickinson recorded second-quarter revenues of $2,072 million, up 3.6% (or 5.1% in constant currency) year over year. Revenues were driven by strong performance in the Medical segment and continued improvement in the Biosciences segment. Revenues, however, fell shy of the Zacks Consensus Estimate of $2,094 million.

On a geographic basis, domestic revenues (contributing 39.9% to overall revenues in the quarter) inched up 0.2% year over year to $826 million while overseas revenues increased 5.9% (or 8.5% in constant currency) to $1,246 million. Overseas revenues continued to be driven by sustained growth in emerging markets and robust safety-engineered product sales.

Segment Details

At BD Medical, global revenues moved up 5.1% (or 6.3% in constant currency) year over year to $1,116 million in the quarter. Revenue growth was driven by strong sales in the Diabetes Care unit and higher revenues from the Medical Surgical Systems and Pharmaceutical Systems units.

Within BD Medical, revenues from Medical Surgical Systems were up 2.2% (or 4.4% in constant currency) year over year to $551 million. Diabetes Care revenues increased 8.2% (up 10.4% in constant currency) to $251 million, while Pharmaceutical Systems revenues were up 7.9% (up 6.6% in constant currency) to $314 million.

At BD Diagnostics, global revenues slipped 0.9% (but up 1.0% in constant currency) to $653 million. Strong sales in the Preanalytical Systems unit were partially offset by ongoing softness in Women's Health and Cancer in the U.S.

Within BD Diagnostics, Preanalytical Systems revenues rose 3.6% (up 5.5% in constant currency) to $342 million but Diagnostic Systems revenues fell 5.5% (or 3.6% in constant currency) to $311 million.

Global revenues from the BD Biosciences unit increased 8.2% (or 10.2% in constant currency) to $302 million, led by continued strength in emerging markets, solid instrument placements and timing of orders.

Margins

Gross profits rose 3.4% to $1,053 million in the reported quarter. However, gross margin declined marginally by 10 basis points (bps) to 50.8%.

Consolidated operating costs and expenses increased 4.4% year over year to $1,690 million, as Becton, Dickinson spent more both on selling and administrative as well as research and development activities. Operating earnings remained flat at $381 million; however, operating margin declined 70 bps to 18.4% from 19.1% in the second quarter of fiscal 2013.

Fiscal 2014 Guidance

For fiscal 2014, Becton, Dickinson raised its adjusted earnings per share guidance to the range of $6.22 to $6.25 from the prior range of $6.19 to $6.22. The upgraded earnings guidance represented year-over-year growth of 7.0–7.5%.

On a foreign currency-neutral basis, adjusted earnings per share are expected to grow between 10.0 and 10.5%, or 11.0 and 11.5% excluding the incremental impact of the medical device tax. The current Zacks Consensus Estimate of $6.23 lies within the guided range.

Becton, Dickinson continues to expect revenue growth in the range of 4.0 to 5.0% for fiscal 2014. In constant currency, revenue growth is expected between 4.5 and 5.0%.

Becton, Dickinson plans to repurchase about $450 million of its common stock in fiscal 2014.

Our Take

Becton, Dickinson strides forward on a positive note with its fiscal 2014-second quarter earnings exceeding expectations. Moreover, we appreciate the upward revision in guidance for the ongoing fiscal year.

While the domestic market is largely penetrated, the company’s robust growth in the international markets is a material upside. Further, penetration in lucrative markets should bolster the top line for Becton, Dickinson.

However, Becton, Dickinson faces a number 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.

Zacks Rank

Currently Becton, Dickinson carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth reckoning in the medical/dental supply industry include Cardinal Health, Inc. (CAH - Analyst Report), The Cooper Companies Inc. (COO - Analyst Report) and Steris Corp. (STE - Snapshot Report). All the three stocks carry a Zacks Rank #2 (Buy).

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