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Becton, Dickinson Q3 Earnings Meet, Revenues Top Estimates

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Medical technology major Becton, Dickinson and Company (BDX) reported adjusted earnings per share of $1.68 for the third quarter of fiscal 2014 ended Jun 30, 2014, reflecting a 9.1% rise (or 7.8% in constant currency) over the prior-year level of $1.54. Adjusted earnings per share were in line with the Zacks Consensus Estimate.

The company reported net earnings of $326 million, up 11.6% from $292 million in the third quarter of fiscal 2013. Net earnings per share escalated 12.7% to $1.69 from $1.50 in the prior-year quarter.

Becton, Dickinson and Company - Earnings Surprise | FindTheBest



Revenues for the third quarter stood at $2,157 million, up 5.1% (or 4.6% in constant currency) year over year and easily surpassed the Zacks Consensus Estimate of $2,140 million. The upside was driven by strong performance in the Medical segment and continued improvement in the Biosciences segment.

Domestic revenues (contributing 40.4% to overall revenues in the quarter) inched up 2.7% year over year to $871 million while overseas revenues increased 6.7% (or 6% in constant currency) to $1,286 million. Overseas revenues continued to be driven by sustained growth in emerging markets and robust safety-engineered product sales.

Segment Details

At BD Medical, global revenues moved up 5.4% (or 4.7% in constant currency) year over year to $1,201 million in the quarter. Revenue growth was driven by strong sales in the Medical Surgical Systems and Pharmaceutical Systems units.

Within BD Medical, revenues from Medical Surgical Systems were up 5.2% (or 6% in constant currency) to $590 million. Diabetes Care revenues increased 3.2% (or 3.6% in constant currency) to $258 million, while Pharmaceutical Systems revenues spiked 7% (or 3.4% in constant currency) to $353 million.

At BD Diagnostics, global revenues edged up 3.7% in both reported and constant currency to $679 million. Strong sales in the Preanalytical Systems unit were partially offset by ongoing softness in Women's Health and Cancer in the U.S.

Within BD Diagnostics, Preanalytical Systems revenues rose 5.5% (or 5.9% in constant currency) to $364 million while Diagnostic Systems revenues inched up 1.6% (or 1.4% in constant currency) to $315 million.

Global revenues from the BD Biosciences unit increased 7.8% (or 6.6% in constant currency) to $277 million, led by a favorable comparison to the prior year as well as solid instrument placements and continued strength in emerging markets.


Gross profits improved 4.8% to $1,111 million from $1,060 million in the prior-year quarter. However, gross margin declined marginally by 10 basis points (bps) to 51.5% from 51.6% a year ago.

Consolidated operating costs and expenses increased 3.9% to $1,712 million, as Becton, Dickinson spent more on research and development activities during the quarter. Operating earnings increased 9.9% to $445 million while operating margin expanded 90 bps to 20.6% from 19.7% in the third quarter of fiscal 2013.

Fiscal 2014 Guidance

For fiscal 2014, Becton, Dickinson reaffirmed its adjusted earnings per share guidance in the range of $6.22 to $6.25, which represents 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. The current Zacks Consensus Estimate of $6.25 coincides with the higher end of the guided range.

Becton, Dickinson continues to expect revenue growth in the range of 4.0 to 5.0% for fiscal 2014. In constant currency, revenue growth is expected between 4.5 and 5.0%.

Becton, Dickinson plans to repurchase about $450 million of its common stock in fiscal 2014.

Our Take

Becton, Dickinson strides forward on a positive note with its fiscal 2014-third quarter earnings in line and revenues ahead of expectations. Moreover, we appreciate the reaffirmed guidance for the ongoing fiscal year.

Strengths in the Medical Surgical Systems as well as the Preanalytical Systems unit continue to boost revenues. While the domestic market is largely penetrated, the company’s robust growth in the international markets is a material upside. Further, penetration in lucrative markets should bolster the top line for Becton, Dickinson.

However, Becton, Dickinson faces a number of competitors in each of its three business segments. It faces different groups of highly-focused competitors in each of its markets.

Zacks Rank

Currently, Becton, Dickinson carries a Zacks Rank #3 (Hold). Better-ranked stocks in the medical/dental supply industry include Align Technology Inc. (ALGN), Bio-Reference Laboratories Inc. (BRLI) and McKesson Corporation (MCK). All these stocks carry a Zacks Rank #2 (Buy).

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