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Medical technology major Becton, Dickinson and Company (BDX - Analyst Report) reported first-quarter fiscal 2013 earnings per share from continuing operations of $1.35, reflecting a beat of 9.8% over the Zacks Consensus Estimate.

The company reported net income of $625.4 million ($3.13 per share), which includes $355.2 million ($1.78 per share) from discontinued operations.

Quarter in Detail

Becton Dickinson recorded first-quarter revenues of $1,900.2 million, up 3.7% (up 5.2% in constant currency) year over year, sailing past the Zacks Consensus Estimate of $1,864 million.

On a geographic basis, domestic revenues (contributing 43.7% in the first quarter) inched up 3% year over year to $830.1 million while overseas revenues increased 4.3% (up 7% in constant currency) to $1,070.1 million. Overseas revenues were driven by sustained growth in emerging markets and robust safety product sales.

At BD Medical, global revenues moved up 3.5% (up 5.1% in constant currency) year over year to $983.4 million in the quarter, driven by healthy revenues from Diabetes Care and higher revenues from safety-engineered offerings in the international market.

Within BD Medical, revenues from Medical Surgical Systems were up 2.6% (up 3.9% in constant currency) year over year to $535.9 million. Diabetes Care sales increased 7.5% (up 9.1% in constant currency) to $242.8 million, while Pharmaceutical Systems revenues were up 1.2% (up 4% in constant currency) to $204.6 million.

At BD Diagnostics, global revenues were up 5% (up 6.1% in constant currency) year over year to $651.9 million on account of growth in expansion in overseas markets and an early, burdensome flu season. Preanalytical Systems revenues rose 5.7% (up 6.9% in constant currency) to $334.8 million while Diagnostic Systems sales were up 4.3% (up 5.3% in constant currency) to $317.2 million.

Global revenues from the BD Biosciences unit improved 1.7% (up 3.3% in constant currency) year over year to $264.9 million, led by strong instrument placements in the domestic market. This segment is solely comprised of Cell Analysis following the decision to divest Discovery Labware.  

Gross margin expanded 210 basis points (bps) to 52.9% in the reported quarter. Consolidated operating costs and expenses increased marginally 0.9% year over year to $1,508.1 million, as Becton Dickinson spent more on both selling and administrative expenses and on R&D. However, operating margin improved 220 bps to 20.6% in the first quarter.

Outlook

Based on encouraging first-quarter results, Becton Dickinson revised its guidance for fiscal 2013. It now envisages reported sales growth for fiscal 2013 in the range of 3.5% to 4% compared with the prior guidance of 2% to 3%. The company forecasts constant currency revenue growth in the range of 4% to 4.5% compared with 3.5% to 4.5% earlier. The current Zacks Consensus Estimate of $7,943 million implies a year-over-year growth of over 3%, trailing the company’s expectation.

Becton Dickinson now expects reported earnings per share from continuing operations for fiscal 2013 in a band of $5.69 and $5.72 versus the earlier outlook of $5.58 and $5.64. The projection implies year-over-year constant currency growth of 7.5%-8% for fiscal 2013 or 10.5% -11% after accounting for the medical device tax implemented in January 2013.

The current Zacks Consensus Estimate of $5.65 is below the company’s guidance. Further, Becton Dickinson plans to repurchase $500 million of its shares in fiscal 2013, subject to market conditions.

Our Take

Becton Dickinson started fiscal 2013 on a positive note with its first-quarter results exceeding expectations. Moreover, the upward revision in guidance for the ongoing fiscal reflects positive driving events.

While the domestic market is largely penetrated, the company’s robust growth in the international market is a material upside. Further penetration in lucrative markets should bolster the top-line for Becton Dickinson which serves a market that is partly insulated from volatile macroeconomic conditions.

In light of these facts, the estimate revision trend for fiscal 2013 reflects a bullish sentiment for Becton Dickinson. Accordingly, the stock carries a Zacks Rank #2 (Buy). Other medical stocks such as Cyberonics (CYBX - Analyst Report), Smith & Nephew (SNN - Snapshot Report) and ResMed (RMD - Analyst Report), carrying a Zacks Rank #1 (Strong Buy) are also expected to do well and warrant a look.

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