Becton Beats Rev Est, Tweaks Guidance - Analyst Blog

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Becton, Dickinson and Company ( BDX ) reported adjusted (excluding one-time items) second-quarter fiscal 2012 earnings per share of $1.38 matching the Zacks Consensus Estimate and the year-ago earnings per share.

Net income (as reported) for the second quarter dropped 6.7% year over year to roughly $291 million (or $1.39 a share).

During the reported quarter, Becton Dickinson inked a definitive agreement to sell the Discovery Labware sub-segment of BD BioSciences. The deal is expected to be accomplished by the end of the current calendar year subject to standard conditions. The assets to be hived off are expected to generate revenues and earnings per share of $235 million and in a range 23 cents to 27 cents, respectively. Becton Dickinson expects to book a profit from the transaction.    

Revenues

Becton Dickinson recorded second quarter revenues of $1,991 million, up 3.6% (or 4.6% in constant currency) year over year, surpassing the Zacks Consensus Estimate of $1,942 million.

On a regional basis, domestic revenues inched up 2.2% year over year to $848 million while overseas revenues moved up 4.6% (or 6.3% in constant currency) to $1,143 million. Overseas sales were driven by sustained growth in emerging nations and robust safety sales.

Second Quarter Review by Segments

At BD Medical, global revenues moved up 4.1% (or 5.3% in constant currency) year over year to $1,021 million in the quarter, driven by healthy revenues from Diabetes Care and Pharmaceutical Systems.

Within BD Medical, revenues from Medical Surgical Systems were up 2.8% year over year to $518.9 million. Diabetes Care sales moved up 5.5% to $219.2 million while Pharmaceutical Systems revenues were up 5.2% to $283 million.

At BD Diagnostics, global revenues were up 4.1% (or 5% in constant currency) year over year to $630 million, on account of solid growth in both Women's Health and Cancer as well as Preanalytical Systems. Preanalytical Systems revenues rose 5.6% to $323.3 million while Diagnostic Systems sales were up 2.5% to $306.7 million. 

Global sales from the BD Biosciences unit increased 1.3% (or 1.7% in constant currency) year over year to $340 million driven by clinical reagent sales in the Cell Analysis segment and robust revenues from emerging markets. Cell Analysis revenue rose 2.4% to $261.5 million while Discovery Labware sales declined 2.2% to $78.1 million.

Margins and Expenses

Gross margin declined to 51.2% in the reported quarter from 52.1% a year ago while operating margin dropped somewhat to 20.4% from 22.9% in the prior-year quarter. Consolidated operating costs and expenses increased 6.9% year over year to $1,584.4 million as Becton Dickinson spent more on selling and administrative (up 12%) expenses but marginally less on R&D (down 0.5%).

Outlook

The company revised its revenue growth forecast, in constant currency, to a range of 3% to 4% from 2% to 4% earlier. On a reported basis, Becton Dickinson raised its growth forecast to a range of 1% to 2% from roughly flat earlier. The company lifted its target for reported earnings per share, from continuing operations, to a higher band of $5.68 and $5.73 from $5.60 and $5.70 earlier. It intends to repurchase, subject to market-related conditions, $1.5 billion of its common stock during the current fiscal year.

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'spreeminent 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 ) 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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