Earnings Scorecard: Becton (BDX)

Becton, Dickinson and Company (BDX) recently announced first-quarter fiscal 2011 (ended December 31) results. Adjusted (excluding one-time items) earnings per share of $1.35 beat the Zacks Consensus Estimate of $1.29 and surpassed the year-ago figure of $1.30. Net income from continuing operations (on a reported basis) for the quarter increased 3.3% to roughly $314 million (or $1.35 a share).

The Results in Brief

Becton Dickinson recorded revenues of $1.84 billion for the reported quarter, down 1.4% (or 1.5% in constant currency) year over year, and missed the Zacks Consensus Estimate of $1.89 billion

Domestic sales for the quarter were $829 million, down 2.9% year over year, which includes a negative impact of 6% from the flu pandemic in the preceding year. Ex-U.S. revenues were $1.01 billion, down 0.2% (or 0.3% in constant currency), owing to a negative 3% impact from the flu pandemic. Becton, Dickinson experienced higher growth in emerging markets, which was offset by the slowdown in European markets.

We have discussed the quarterly results at length here: Becton 1Q Mixed, Profit Inches Up

Agreement – Estimate Revisions

The overall trend in estimate revisions for fiscal 2011 is mixed, with a downward bias, following the release of the first quarter results. Out of the 19 analysts covering the stock, 4 raised their estimates over the past week while 7 lowered their forecasts. A similar pattern applies for fiscal 2012 with 4 analysts (out of 18) raising their forecast and 8 lowering the same over the identical timeframe.

The mixed sentiment was fueled by headwinds from several factors such as lack of positive triggers and lackluster sales growth.

Magnitude – Consensus Estimate Trend

Downward directional agreement, for the most past, has led to a 1 cent decline in the forecast for fiscal 2011 and a 4 cent drop for fiscal 2012. The current Zacks Consensus Estimates for fiscal 2011 and 2012 are $5.51 and $6.10, respectively, reflecting an estimated 12.5% and 10.67% year-over-year growth.

Becton Dickinson Stays at Neutral

Becton, Dickinson continues to forecast revenue growth of 4% year over year for fiscal 2011. The company still expects reported earnings per share from continuing operations to grow about 11% to 13% to a range of $5.45 to $5.55. Adjusted earnings per share from continuing operations, for fiscal 2011, has been projected to grow in a band of 10% to 12%, unchanged from the earlier view.

We remain cautious about Becton, Dickinson due to the lack of major short-term catalysts. The rising demand for safety-needle products (with higher price points and margins) was the primary driver of the company’s past growth, which is not expected to continue, given that the U.S. market is predominantly already penetrated. Further, Becton, Dickinson faces a wide range of competitors in each of its three business segments.

We are, however, hopeful that growth may recover in the future with the European Union adoption of safety requirements, recovery in research markets and continued growth in flow cytometry in the clinical setting. Becton, Dickinson’s preeminent global healthcare products franchise is partly insulated from volatile macroeconomic conditions and structural deficiencies elsewhere in the healthcare delivery field.

The company competes, in niches, with different companies such as Baxter International (BAX) among others. We currently have a long-term Neutral recommendation on the stock, which is supported by a short-term Zacks #3 Rank (Hold).

BECTON DICKINSO (BDX): Free Stock Analysis Report

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