Becton, Dickinson and Company (BDX) recently announced second-quarter fiscal 2011 (ended March 31) results. Adjusted (excluding one-time items) earnings per share of $1.38 beat the Zacks Consensus Estimate of $1.30 and surpassed the year-ago figure of $1.24. Net income for the quarter increased 4.8% year over year to about $312 million on the back of higher revenues across the board.
The Results in Brief
Becton Dickinson recorded revenues of $1,922 million in the reported quarter, up 6.8% (or 4.6% in constant currency) year over year, well ahead of the Zacks Consensus Estimate of $1,856 million.
Domestic sales for the quarter were $829 million, up 4.7% year over year. Ex-U.S. revenues were $1,093 million, up 8.5%. International sales were driven by sustained healthy growth in emerging markets, partly ebbed by the slowdown in Western European markets due to a soft economy.
We have discussed the quarterly results at length here:
http://www.zacks.com/stock/news/52064/Becton+Tops%2C+Beefs+Up+Guidance
Agreement – Estimate Revisions
The overall trend in estimate revisions for fiscal 2011 has overwhelmingly inclined towards the positive side following the release of the second quarter results. 16 analysts (out of 17) covering the stock raised their estimates over the past month (including 1 over the prior week) with no case of downward revision. A similar trend was seen for fiscal 2012 with 16 analysts (out of 18) raised their forecast over the last 30 days (including 1 over the past 7 days) with no downward revision.
We believe that the positive revisions are an outcome of the forecast-shattering second quarter results coupled with the company’s upward guidance revision for fiscal 2011.
Magnitude – Consensus Estimate Trend
Uniform upward directional movement has led to an increase in annual forecast for Becton Dickinson. Estimates for fiscal 2011 and 2012 have gone up by 11 cents and 9 cents, respectively, over the last 30 days. The magnitude of revisions is only a penny over the past week, in both cases.
Becton Dickinson Stays at Neutral
Based on the anticipated favorable foreign exchange impact, Becton Dickinson has hiked its revenue and earnings forecasts for fiscal 2011. The company now expects sales for the year to grow about 5% to 6% year over year versus its earlier projected growth rate of 4%.
Moreover, the company has raised its earnings per share (on a reported basis) target to a higher range of $5.55 to $5.65 from its prior view of $5.45 to $5.55, reflecting a 13% to 15% year over year growth. The revised forecast incorporates the unfavorable impact of the Japan disaster and higher resin costs. The current Zacks Consensus Estimate for fiscal 2011 is $5.62.
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 already largely penetrated. On the positive side, Becton Dickinson’spreeminent global healthcare products franchise is partly insulated from volatile macroeconomic conditions and structural deficiencies elsewhere in the healthcare delivery field.
Further, Becton Dickinson faces a wide range of competitors, including Baxter International (BAX) in certain niches, in each of its three business segments. We currently have a long-term Neutral recommendation on the stock, backed by a short-term Zacks #3 Rank (Hold).
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
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