Becton, Dickinson and Company
(
BDX
) reported third-quarter fiscal 2012 earnings per share from
continuing operations of $1.52 missing the Zacks Consensus Estimate
of $1.53 per share.
The company reported net income of $326.9 million ($1.59 per
share), which includes $15.3 million (7 cents per share) from
discontinued operations pertaining to the sell-off of the Discovery
Labware unit of BD Biosciences by the end of calendar year
2012.
Revenues
Becton Dickinson recorded third quarter revenues of $1,981 million,
up 1.5% (or 4.9% in constant currency) year over year, missing the
Zacks Consensus Estimate of $2,018 million.
On a regional basis, domestic revenues inched up 1.1% year over
year to $837 million while overseas revenues moved up 1.7% (or 7.8%
in constant currency) to $1,144 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 2.4% (or 6.4% in constant
currency) year over year to $1,070.1 million in the quarter, driven
by healthy revenues from Diabetes Care and Pharmaceutical Systems.
Within BD Medical, revenues from Medical Surgical Systems were up
0.5% year over year to $531.8 million. Diabetes Care sales moved up
5.7% to $232.7 million, while Pharmaceutical Systems revenues were
up 3.4% to $305.6 million.
At BD Diagnostics, global revenues were up 1.7% (or 4.7% in
constant currency) year over year to $642.3 million, on account of
growth in both Women's Health and Cancer care, as well as
Preanalytical Systems. Preanalytical Systems revenues rose 0.9% to
$333.5 million while Diagnostic Systems sales were up 2.6% to
$308.8 million.
Global sales from the BD Biosciences unit decreased 2.7% (or up
0.2% in constant currency) year over year to $268.2 million. This
segment solely comprised of Cell Analysis following the decision to
divest Discovery Labware.
Margins and Expenses
Gross margin declined somewhat to 52.2% in the reported quarter
from 52.7% a year ago while the operating margin dropped slightly
to 22.7% from 22.9% in the prior-year quarter. Consolidated
operating costs and expenses increased 1.8% year over year to
$1,531.5 million as Becton Dickinson spent marginally more on both
selling and administrative expenses and on R&D.
Outlook
Becton Dickinson forecasts reported sales growth for fiscal 2012 of
approximately 1% compared with 1% to 2% earlier. The company
revised its revenue growth forecast in constant currency, to 4%,
from 3% to 4% earlier. The company cut its target for reported
earnings per share from continuing operations for fiscal 2012, to a
band of $5.33 and $5.38, from between $5.68 and $5.73 earlier. The
change captures the impact of reclassifying Discovery Labware as a
discontinued unit. On a constant currency basis, Becton Dickinson
reiterated its earnings per share growth forecast of 4% to 5%,
which includes the impact of the acquisition of Safety
Syringes.
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's preeminent 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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