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Can BD Medical Drive Becton, Dickinson's (BDX) Q4 Earnings?

Zacks Equity Research

Becton, Dickinson and Company’s BDX, popularly known as BD, fourth-quarter fiscal 2019 results are scheduled to release on Nov 5, before market opens. While the results are likely to show steady growth in the core BD Medical segment, headwinds in the Drug Coated Balloon (“DCB”) business and unfavorable foreign exchange rates might have partially impacted performance.

BD delivered a positive earnings surprise of 1% in the last reported quarter and has a positive average earnings surprise of 0.5% for the trailing four quarters.

Which Way Are Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for BD’s earnings per share (EPS) is pegged at $3.30, suggesting a year-over-year decline of 12.6%. The same for revenues stands at $4.57 billion, indicating an increase of 3.8%.

Let’s see how things are shaping up prior to the earnings release.

Becton, Dickinson and Company Price and EPS Surprise

 

Becton, Dickinson and Company Price and EPS Surprise

Becton, Dickinson and Company price-eps-surprise | Becton, Dickinson and Company Quote

BD Medical Likely to Drive Q4 Earnings

BD Medical, a major revenue driver, is expected to drive fiscal fourth-quarter results. The segment is likely to have benefited from strong year-over-year growth in revenues from needles, syringes and intravenous catheters for medication delivery, prefilled IV flush syringes, syringes and pen needles for diabetes care.

It is encouraging to note that for the fiscal fourth quarter, the Zacks Consensus Estimate for the segment’s revenues is pegged at $2.44 billion, suggesting a rise of 4.2% year over year. In fact, for fiscal 2019, management at BD expects the Medical segment to grow 5% to 6%.

Management expects to have gained from the launch of the BD Pyxis ES System version 1.6 in May. Also, integration of three technologies — BD Pyxis ES Refrigerator, BD Pyxis Track and Deliver, and BD HealthSight Data Manager — in the segment might have boosted the quarterly performance.

Notably, the sub-segments — Medical Surgical Systems, Pharmaceutical Systems and Diabetes Care — are expected to have driven the unit in the to-be-reported quarter.

The Zacks Consensus Estimate for Medical Surgical Systems’ fiscal fourth-quarter revenues stands at $1.02 billion, calling for a year-over-year rise of 5.6%. The growth is expected to have been driven by strength in vascular access and infusion disposables.

For Diabetes Care, the Zacks Consensus Estimate for fourth-quarter revenues stands at $290 million, suggesting a rise of 1.8% year over year. Steady uptake of the new pen needle Nano Pro and solid show in emerging markets are expected to reflect in the results.

Also, for Pharmaceutical Systems, the Zacks Consensus Estimate for fourth-quarter revenues is pinned at $419 million, suggesting a year-over-year rise of 4%. The sub-segment is expected to have gained from strength in Europe.

Other Factors at Play

Strong performance by the BD Life Sciences and BD Interventional arms might reflect on the company’s fourth-quarter results.

The Zacks Consensus Estimate for BD Life Sciences’ fourth-quarter revenues is pinned at $1.14 billion, marking a year-over-year upside of 3%. Strength in the segment’s molecular and diagnostic systems and continued adoption of BD MAX and Phoenix panels are encouraging aspects.

Also, the Zacks Consensus Estimate for BD Interventional’s fourth-quarter revenues is pegged at $984 million, showing a sequential increase of 0.3%. The segment offers a wide spectrum of products like the 4 French WavelinQ, Covera and Venovo, which might have driven the quarterly performance.

Reflective of these, BD kept its fiscal 2019 guidance intact.

Notably, the company expects revenue growth of 8-9%. At constant currency (cc), revenues are anticipated to increase 5-6%.

Adjusted EPS is expected between $11.65 and $11.75, indicating growth of 12% at cc.

However, the recent market reaction to the FDA letter regarding the DCB business is expected to build near-term pressure on BD. Notably, sales from the DCB Business are expected to reduce by 50% through the remaining of fiscal 2019.

That’s not all. Management at BD expects incremental foreign exchange pressure in the remaining of fiscal 2019, which was pronounced in the last reported quarter as well.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. But that is exactly the case here.

Earnings ESP: BD has an Earnings ESP of +0.61%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BD carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this time around.

DENTSPLY SIRONA XRAY has an Earnings ESP of +5.05% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AmerisourceBergen Corporation ABC has an Earnings ESP of +0.55% and a Zacks Rank #3.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.50% and a Zacks Rank #3.

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