Earnings Scorecard: Becton, Dickinson (BDX)

Becton, Dickinson (BDX) announced third-quarter (ending June 30) fiscal 2010 adjusted earnings per share of $1.29, beating the Zacks Consensus Estimate of $1.25 while falling slightly short of the year-ago figure of $1.30.

Becton, Dickinson had revenues of $1.88 billion, up 3.2% year over year (or 3.9% in constant currency). Revenues were negatively impacted by a slowdown in European markets.

Sales of the BD Medical segment were adversely impacted by lower placement of Pharmaceutical Systems on account of timing of orders. The BD Diagnostics segment put in an unimpressive performance due to the weak U.S. economy, which led to a decline in physician office visits.

Becton, Dickinson forecasted 5% year over year revenue growth for fiscal 2011, which represents a drop of about 100 bps from its earlier guidance. Revenue is expected to increase in the range of 5% to 6%, in constant currency, lower than the earlier guidance of 6%, on account of lower lab testing and reduced demand from hospitals.

We have discussed the quarterly results at length here: Becton Dickinson Exceeds

Agreement – Estimate Revisions

Estimates for fiscal year 2010 have hardly moved following the release of the third-quarter results. Out of the 11 analysts covering the stock, 1 has revised his/her estimate upward with none making downward revisions. Over the past 30 days, on the other hand, there was only one case of upward movement but 5 instances of downward drift.

Magnitude – Consensus Estimate Trend

Downward directional agreement has led to a 3 cent drop in the forecast for fiscal 2010 over the past 30 days. There was a minor increase of a penny over the past 7 days. The current Zacks Consensus Estimate for 2010 is $5.11, reflecting an estimated 3.2% year-over-year growth.

Becton, Dickinson Stays at Underperform

Becton, Dickinson is a global leader in needle-free safety products as well as several diagnostic laboratory instruments. The company is a beneficiary from increasing rates of microbial screening.

We believe the Underperform rating is warranted given the lower near-term growth prospects relative to the company’s longer-term growth objectives and uncertainty surrounding research and capital spending. In particular, the company’s disposable and consumable products remain vulnerable to a slowdown in hospital, lab-testing and doctor-visit volumes in the U.S. and Europe.

While BDX’s focus on safety-engineered products gained momentum in the past (as health-care providers sought to reduce hospital acquired infections), the market is now saturated in the U.S. and slower growth is forecast for the ex-U.S markets. Further, BDX competes with numerous niche players in a multitude of product lines. This is reflected in our Underperform recommendation for the stock, supported by a short-term Zacks #4 Rank (Sell).

BECTON DICKINSO (BDX): Free Stock Analysis Report

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