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Reaffirming Becton at Neutral

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Lackluster results, for the first quarter of fiscal 2012, from Becton, Dickinson and Company (BDX - Analyst Report) reflect its lower year-over-year earnings due to higher raw material prices, tough pricing comparisons and rising expenditures for recent acquisitions.

Net income (as reported) for the first quarter dropped 16.8% year over year to roughly $263 million (or $1.21 a share). Becton Dickinson recorded revenues of $1,888 million in the reported quarter, up 2.5% (or 2.4% in constant currency) year over year.

On a geographic basis, U.S. revenues were flat year over year at $829 million while ex-U.S. revenues moved up 4.5% (or 4.4% in constant currency) to $1,059 million. International sales were driven by sustained growth in emerging nations and robust safety sales.

We remain cautious about Becton Dickinson due to the lack of major short-term catalysts. The rising demand for safety-needle products (with higher price points and margins) was the primary driver of the company’s past growth, which is not expected to continue, given that the U.S. market is already largely penetrated.

On the positive side, Becton Dickinson’s preeminent global healthcare products franchise is partly insulated from volatile macroeconomic conditions and structural deficiencies elsewhere in the healthcare delivery field.

Becton Dickinson faces a wide range of competitors, including Baxter International (BAX - Analyst Report) in certain niches, in each of its three business segments. We currently have a long-term Neutral recommendation on the stock. The stock currently retains a Zacks #3 Rank, which translates into a short-term “Hold” recommendation.

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