They will borrow to buy back stock until its not longer accretive to EPS. Sooner or later borrowing costs will increase , either by rising interest rates or rating downgrades and the game is over. Domestic cash flow covers the dividend and not much else.
The only possible upside for BDX is a takeover, but really why would anyone buy them? Crappy acquisitions, eroding margins, no growth. This company can no longer continue to issue debt to buy back enough shares to make EPS. Enjoy the dividend while your investment takes a beating.
He is correct in all respects. The buy backs are accretive to EPS or the company wouldn't do them. Eventually, debt capacity runs out and the company will have to find another way to generate earnings.
Wow, buried in the notes of the latest 10Q is a $69 million loss on interest rate derivatives in Sept 2011. You'd be hard pressed to find it in the Sept 10K, because its not in the footnotes. How could management not address this in the earnings call?
That's a 7% loss in under 2 mos. Looks like their bet went the wrong way, and they will be paying this for a long time.
Very true. JNJ will never bite and the BD Board will never surrender and sell itself. Watch for certain SVPs to suddenly leave to pursue other interests. The BOD doesn't like earnings misses.
BD won't be paying 1% for 5 and 10 year money, esp after today's negative outlook and yesterday's downgrade. They have well over $1B in cash, have positive cash flow, and yet are entering into their second billion dollar debt issue in 2 years for repo. What are they doing over there?
The happy motivated people are gone. Vince has a tough road ahead in 2012. It will be interesting to see how long they can sustain buying back shares.