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BDX Beats on Both Earnings and Revs

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Medical technology major Becton, Dickinson and Company (BDX - Free Report) posted adjusted earnings per share to $1.58 for the fourth quarter of fiscal 2013, topping the Zacks Consensus Estimate of $1.47 as well as the year-ago earnings of $1.42 by 11.3%.

Adjusted earnings exclude one-time items as well as the medical device excise tax that came into effect in January 2013. However, reported earnings fell drastically by 66.0% to 46 cents per share from $1.35 per share in the fiscal 2012-quarter.

Revenues in the quarter went up 6.8% to $2,101 million, also exceeding the Zacks Consensus Estimate of $2,045 million. In constant currency, revenues grew 7.2% in the quarter.

For fiscal 2013, adjusted earnings rose 10.8% to $5.95 per share from $5.37 per share in the prior fiscal year. Yearly earnings surpassed the Zacks Consensus Estimate of $5.75. Revenues in the year rose 4.5% to $8,054 million.

Revenues by Geography

Revenues in the U.S. went up 3.4% to $851 million. The increase was attributable to the Pharmaceutical Systems unit that benefitted from the acquisition of Safety Syringes and strong orders, partially offset by softness in Women's Health and Cancer.

Revenues outside the U.S. rose 9.3% (or 10.1% in constant currency) to $1.2 billion. The increase was driven by continued strength in emerging markets and strong sales of safety-engineered products.

For the fiscal year ended Sep 30, 2013, revenues in the U.S. edged up 2.0% to $3.4 billion, while international revenues rose 6.3% (8.0% in constant currency) to $4.7 billion.

Segments in Detail

Revenues in the BD Medical segment rose 6.8% (6.7% on a constant currency basis) globally to $1.1 billion, reflecting strong Medical Surgical Systems and Pharmaceutical Systems sales. For the fiscal year ended Sep 30, 2013, revenues in the segment went up 5.3% or 6.0% on a constant currency basis.

Global revenues in the BD Diagnostics segment scaled up 5.4% (6.3% in constant currency) to $680 million, due to impressive sales of Preanalytical Systems' safety-engineered products, and solid sales within the Diagnostic Systems unit driven by Kiestra Lab Automation installations to some extent. For the fiscal year, segment revenues inched up 4.3%, or 5.2%, in constant currency.

Revenues in the BD Biosciences swelled 10.0% (11.6% in constant currency) to $300 million globally, on the back of solid instrument placements in Cell Analysis, the reversal of an unfavorable timing of orders in Advanced Bioprocessing, and government funding in Japan. For fiscal 2013, revenues edged up 2.0%, or 3.6% on a constant currency basis.

Fiscal 2014 Guidance

For fiscal 2014, Becton Dickinson expects both reported and constant currency revenue growth in the range of 4.0 to 5.0%. BDX also anticipates adjusted earnings per share of $5.81 for the year, which is below the Zacks Consensus Estimate of $6.21 as well as the fiscal 2013 earnings by 2.4%.

In constant currency, adjusted earnings per share are anticipated to grow between 8.5 and 9.5%, or between 9.0 and 10.0% excluding the incremental impact of the medical device tax. Becton Dickinson plans to repurchase about $450 million of its common stock in 2014.

Our Take

BDX continues on a positive note with its fourth quarter and fiscal 2013 results exceeding expectations on both fronts. Following the earnings announcement, shares rose 0.5% yesterday.

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, we are disappointed about its lower earnings guidance for fiscal 2014, which is below the analyst consensus as well. As a result, we remain concerned about the future stock price movement of the company.

BDX currently carries a Zacks Rank #3 (Hold). While we remain on the sidelines about the company, medical/dental supplies stocks that are worth considering include Align Technology Inc. (ALGN - Free Report) , McKesson Corporation (MCK - Free Report) , and Merit Medical Systems, Inc. (MMSI - Free Report) . All of them carry a Zacks Rank #1 (Strong Buy).

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