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Will Becton, Dickinson (BDX) Surprise This Earnings Season?

Zacks Equity Research

Becton, Dickinson and Company (BDX) is set to release its fiscal 2014-third quarter results on Jul 31, before the opening bell. In the last quarter, the company posted a positive earnings surprise of 2.0%. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

We are optimistic about a number of key product initiatives pursued by Becton, Dickinson. In Mar 2014, the company has received 510(k) clearance and Clinical Laboratory Improvement Amendments (:CLIA) waiver from the U.S. Food and Drug Administration (:FDA) for nasopharyngeal swab specimens on the BD Veritor System. In June, Becton, Dickinson also introduced connectivity solutions of its previously launched BD BACTEC FX40 Blood Culture System.

Further, Becton, Dickinson maintains its focus on expansion into overseas markets, in particular, emerging markets, which accounted for about 24.5% of sales in the second quarter of fiscal 2014. In particular, growth in safety needles in emerging markets is a bright spot.

However, Becton, Dickinson continues to be challenged by downward pressure on demand for health care products. Hospital and lab-testing expenditure remain areas of concern. High unemployment rates in the U.S. have dampened requirement for doctors’ visits.

For fiscal 2014, Becton, Dickinson continues to expect revenue growth in the range of 4.0 to 5.0%. In constant currency, revenue growth is expected between 4.5 and 5.0%. The company raised its adjusted earnings per share guidance to the range of $6.22 to $6.25 for the year from the prior range of $6.19 to $6.22. The Zacks Consensus Estimate of $6.25 coincides with the upper end of the guidance range.

The upgraded earnings guidance represented year-over-year growth of 7.0–7.5%. On a foreign currency-neutral basis, adjusted earnings per share are expected to grow between 10.0 and 10.5%, or 11.0 and 11.5% excluding the incremental impact of the medical device tax.

Earnings Whispers?

Our proven model does not conclusively show that Becton, Dickinson is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  Earnings ESP, the difference between the Most Accurate Estimate of $1.68 and the same Zacks Consensus Estimate, stands at nil.

Zacks Rank #3 (Hold): The combination of Becton, Dickinson’s Zacks Rank #3 (Hold) and nil ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Sirona Dental Systems Inc. (SIRO), Earnings ESP of 1.04% and a Zacks Rank #2 (Buy).

Hospira Inc. (HSP), Earnings ESP of 1.79% and a Zacks Rank #2 (Buy).

Wright Medical Group Inc. (WMGI), Earnings ESP of 8.89% and a Zacks Rank #2 (Buy).

Read the Full Research Report on BDX
Read the Full Research Report on HSP
Read the Full Research Report on WMGI
Read the Full Research Report on SIRO

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