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Here's Why You Should Hold Becton, Dickinson Stock for Now

Zacks Equity Research

Becton, Dickinson and Company BDX, also known as BD, is expected to benefit from a slew of developments and a strong guidance for fiscal 2019. However, raw material pricing pressure is anticipated to mar the company’s prospects.

The stock currently has a Zacks Rank #3 (Hold).

Price Performance

Shares of BD have rallied 16.4%, comparing favorably with the industry’s decline of 1.2% in a year’s time. The current level is also better than the S&P 500 index’s 3.2% rally.

What’s Deterring the Stock?

BD expects raw material pricing pressure, which increased in 2018, to accelerate into fiscal 2019, primarily due to resin price increases owing to a supply-constrained market. Although pressure from raw materials partially eased in the fiscal first quarter, management expects a 2% headwind from it in fiscal 2019.

Additionally, BD expects a 1% headwind from tariffs in 2019. Customer ordering patterns are also expected to negatively impact second-quarter results.

Why Should You Retain BD?

BD has reiterated its guidance for fiscal 2019.

On a reported basis, BD continues to expect fiscal 2019 revenue growth of 8.5-9.5%, primarily owing to the C. R. Bard acquisition. At cc, the same metric is anticipated to increase 5-6%. The Zacks Consensus Estimate for the same is pegged at $17.45 billion.

For fiscal 2019, adjusted EPS is projected between $12.05 and $12.15, reflecting growth of 13-14% at cc and 10% compared to fiscal 2018. The midpoint of the latest guidance of $12.10 is in line with the Zacks Consensus Estimate.

The company has also seen a slew of developments in recent times.

In the first quarter of fiscal 2019, BD announced the launch of two cloud-based applications, BD HealthSight Data Manager and BD HealthSight Diversion Analytics, which enable an enterprise-wide connected medication management system. Notably, both form part of the BD HealthSight platform.

Moreover, in the BD Interventional segment, WavelinQ was made available for sale in the United States in the first quarter. This product provides a minimally-invasive nonsurgical option for creating critical AV fistulas for hemodialysis procedures.

Last December, BD announced the FDA 510(k) clearance of its BD MAX enteric viral panel, a molecular diagnostic test for the direct qualitative detection and differentiation of enteric viral pathogens that cause viral gastroenteritis. (Read More: Becton, Dickinson's MAX Enteric Viral Panel Cleared by FDA)

Which Way Are Estimates Headed?

For the fiscal second quarter, the Zacks Consensus Estimate for earnings is pegged at $2.59, reflecting a decline of 2.3% on a year-over-year basis. The same for revenues is pinned at $4.22 billion, showing a decline of 0.1% year over year.

Becton, Dickinson and Company Price and Consensus


Becton, Dickinson and Company Price and Consensus | Becton, Dickinson and Company Quote

Key Picks

Some better-ranked stocks in the broader medical space are Cardinal Health CAH), Merit Medical Systems, Inc. MMSI and Surmodics, Inc. SRDX.

Cardinal Health's long-term earnings growth rate is projected at 6.2%. The stock has a Zacks Rank #2 (Buy).

Merit Medical’s long-term earnings growth rate is projected at 13%. The stock has a Zacks Rank #2.

Surmodics’ long-term earnings growth rate is expected at 10%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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