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BD (BDX) Beats on Q3 Earnings and Revenues, Ups '21 View

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Becton, Dickinson and Company (BDX - Free Report) , popularly known as BD, delivered adjusted earnings per share (“EPS”) of $2.74 in the third quarter of fiscal 2021, up 24.5% year over year. The figure surpassed the Zacks Consensus Estimate by 11.4%.

The adjustments include expenses related to purchase accounting adjustments and integration costs, among others.

GAAP EPS for the quarter was $1.72 a share, reflecting an improvement of 77.3% from the year-earlier figure.

Revenues in Detail

BD registered revenues of $4.89 billion in the fiscal third quarter, up 26.8% year over year. However, the figure surpassed the Zacks Consensus Estimate by 8%.

At constant exchange rate (CER), revenues improved 22%.

The top-line uptick was primarily driven by strength in base business performance on the back of continued recovery of the overall healthcare utilization levels following the initial impact of COVID-19.

Segment Details

BD’s operations consist of three worldwide business segments — BD Medical, BD Life Sciences and BD Interventional.

For the quarter under review, BD Medical reported worldwide revenues of $2.38 billion, up 11.9% from the year-ago quarter on a reported basis and 7.7% at CER. Per management, this upside can be attributed to growth in Medication Delivery Solutions, Pharmaceutical Systems and Diabetes Care units. However, this was partially offset by an expected decline in the Medication Management Solutions unit.

Worldwide revenues in the BD Life Sciences segment totaled $1.43 billion, up 50.7% year over year on a reported basis and 43.4% at CER. Per management, this upside was driven by strong sales of the Integrated Diagnostic Solutions unit, associated with COVID-19-diagnostic testing solutions, which include BD Veritor Plus and BD Max Systems.

BD Interventional segment generated worldwide revenues of $1.08 billion, up 38.4% from the year-ago quarter on a reported basis and 34.6% at CER. This was owing to the continued recovery in elective volumes of Surgery and Peripheral Intervention procedures and robust demand for Urology and Critical Care unit’s acute urology products and targeted temperature management portfolio.

Geographic Results

In the fiscal third quarter, revenues in the United States grew 21.5% to $2.57 billion.

Revenues outside the United States grossed $2.32 billion, up 33.5% from the year-ago quarter on reported basis and 22.6% at CER.

Margin Analysis

In the quarter under review, BD’s gross profit rose 30.2% to $2.16 million. Gross margin expanded 113 basis points (bps) to 44.2%.

Selling and administrative expenses rose 26.2% to $1.24 billion. Research and development expenses went up 31.3% year over year to $344 million. Adjusted operating expenses of $1.58 billion increased 27.3% year over year.

Adjusted operating profit totaled $580 million, reflecting a 38.8% surge from the prior-year quarter. Adjusted operating margin in the fiscal third quarter expanded 102 bps to 11.9%.

Financial Position

BD exited the third quarter of fiscal 2021 with cash and cash equivalents, and short-term investments of $3.18 billion compared with $3.76 million at the end of fiscal second quarter. Total debt (including current portion) at the end of fiscal third quarter of 2021 was $17.73 billion compared with $17.72 billion at the end of fiscal second quarter.

During fiscal third quarter, BD repurchased approximately 4.1 million shares at a total cost of $1 billion.

Cumulative net cash flow from operating activities at the end of fiscal third quarter of 2021 was $3.69 billion compared with $2.06 billion a year ago.

Fiscal 2021 Guidance

Although BD continues to assume no major pandemic-led system-wide hospital restrictions on elective procedures, it has started to see some impact on elective procedures from the COVID-19 delta variant in some states in the United States over the past few weeks. As a result, the company assumes some continuation of this in its outlook.

Despite this uncertainty, the company projects its full fiscal year revenues to grow by 16.5-17% on a reported basis (up from the previous outlook of 12-14% growth). The Zacks Consensus Estimate for the revenues is pegged at $19.45 billion.

At CER, BD expects revenue growth of 14%, up from the previous range of 10-12%.

For the full fiscal, adjusted EPS is now anticipated to be $12.85-$12.95, up from the previous guidance range of $12.75-$12.85. The current projection suggests growth of almost 26-27% from the prior fiscal year’s reported number. The Zacks Consensus Estimate for the same is pegged at $12.81.

Our Take

BD exited the third quarter of fiscal 2021 with better-than-expected results. The company’s robust segmental performances, along with solid geographical revenues, are impressive. BD’s announcement of an industry-first CE-marked assay for human papillomavirus screening of at-home self-collected vaginal samples and the FDA’s expanded 510(k) clearance for BD’s at-home system for ascites (PeritX Peritoneal Catheter System) are encouraging.

Launch of its industry-first ready-to-use aqueous povidone-iodine (PVP-I) irrigation solution, and a reimagined digital marketplace for flow cytometry, raise our optimism. BD’s slew of buyouts also augurs well. Expansion of both margins also bodes well for the stock. A raised financial outlook despite pandemic-led uncertainties is encouraging.

However, expected decline in the Medication Management Solutions unit is discouraging.

Zacks Rank and Key Picks

BD currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation (EHC - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Hill-Rom Holdings, Inc. (HRC - Free Report) .

Encompass Health, carrying a Zacks Rank #1 (Strong Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%. The company currently carries a Zacks Rank #2 (Buy).

Hill-Rom reported third-quarter fiscal 2021 adjusted EPS of $1.38, which beat the Zacks Consensus Estimate by 2.9%. Fiscal third-quarter revenues of $717.7 million outpaced the consensus mark by 1.6%. It currently carries a Zacks Rank #2.