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Becton Beats Earnings, Guides High

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Medical technology major, Becton, Dickinson and Company (BDX - Free Report) reported second-quarter fiscal 2013 adjusted earnings per share from continuing operations of $1.44, beating the Zacks Consensus Estimate of $1.35 per share.

The company reported net income from continuing operations of $276.1 million (or $1.39 per share). Total net income was $275.6 million (or $1.39 per share).

Quarter in Detail

Becton Dickinson recorded second-quarter revenues of $2,000.4 million, up 3.7% (up 4.1% in constant currency) year over year, sailing past the Zacks Consensus Estimate of $1,986 million.

On a geographic basis, domestic revenues (contributing 41.2% in the second quarter) inched up 0.3% year over year to $823.6 million while overseas revenues increased 6.2% (up 6.9% in constant currency) to $1,176.8 million. Domestic revenues were negatively affected by the timing of orders while international revenues were boosted by growth in the emerging nations and robust growth of safety engineered products.

At BD Medical, global revenues moved up 4.0% (up 4.2% in constant currency) year over year to $1062.1 million in the quarter, driven by healthy revenues from Diabetes Care, Pharmaceutical Systems and higher revenues from safety-engineered offerings in the international market.

Within BD Medical, revenues from Medical Surgical Systems were up 3.8% (up 4.2% in constant currency) year over year to $538.6 million. Diabetes Care sales increased 5.9% (up 6.6% in constant currency) to $232.1 million, while Pharmaceutical Systems revenues were up 3.0% (up 2.4% in constant currency) to $291.4 million.

At BD Diagnostics, global revenues were up 4.6% (up 4.9% in constant currency) year over year to $658.9 million on account of growth in expansion in overseas markets and an early, burdensome flu season. Preanalytical Systems revenues rose 2.1% (up 2.2% in constant currency) to $330 million while Diagnostic Systems sales were up 7.2% (up 7.8% in constant currency) to $328.9 million.

Global revenues from the BD Biosciences unit improved marginally 0.6% (up 1.9% in constant currency) year over year to $279.3 million, led by strong instrument placements in the domestic market along with robust orders from Advanced Bioprocessing. However, the growth was offset by austerity measures and economic slowdown in Western Europe and Japan, respectively.

Gross margin contracted 30 basis points (bps) 50.9% in the reported quarter. Consolidated operating costs and expenses increased 4.8% year over year to $1,619.2 million, as Becton Dickinson spent marginally more on both selling and administrative expenses and on R&D. Operating margin declined 80 bps to 19.1% in the second quarter.


Based on encouraging second-quarter results, Becton Dickinson revised its guidance for fiscal 2013. The company reiterated reported sales growth for fiscal 2013 in the range of 3.5% to 4%. The company forecasts constant currency revenue growth in the range of 4.5% to 5.0% compared with 4.0% to 4.5% earlier. The current Zacks Consensus Estimate of $7,980 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 $5.72 and $5.75 versus the earlier outlook of $5.69 and $5.72. The projection implies year-over-year constant currency growth of 6.5% -7% (from previously guided 7.5% -8.0%) for fiscal 2013 or 11.0% -11.5% (from previously guided 10.5% -11.0%) after accounting for the medical device tax implemented in January 2013. The current Zacks Consensus Estimate of $5.71 falls within the company’s guidance. Becton Dickinson plans to repurchase $500 million of its shares in fiscal 2013, subject to market conditions.

Our Take

Becton Dickinson continues on a positive note with its fiscal second-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 markets is a material upside. Further penetration in emerging markets should bolster the top-line for Becton Dickinson which serves a market that is partly insulated from volatile macroeconomic conditions.

The stock carries a Zacks Rank #3 (Hold). Other medical stocks such as The Cooper Companies Inc. (COO - Free Report) , MWI Veterinary Supply, Inc. and West Pharmaceutical Services, Inc. (WST - Free Report) , carrying a Zacks Rank #2 (Buy) are expected to do well and warrant a look.

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