Becton, Dickinson and Company (BDX) reported adjusted fourth-quarter fiscal 2011 earnings per share of $1.39, matching the Zacks Consensus Estimate while exceeding the year-ago earnings of $1.24. The adjusted earnings exclude a non-cash charge of $9 million (or 3 cents per share) associated with discontinuation of a research program.
For the full year, adjusted earnings of $5.62 a share trailed the Zacks Consensus Estimate by a couple of cents while exceeding the year-ago earnings of $4.94.
Net income for the fourth quarter dropped 24.4% year over year to roughly $300 million (or $1.36 a share). However, net income from continued operations increased 2.8% year over year to $301.4 million, partly on account of higher revenues from different segments. The stock fell $6.11 (or 8.03%) in pre-market trading.
Revenues
Becton, Dickinson posted fourth quarter sales of $2,051 million, up 9.5% (or 4% in constant currency) year over year, higher than the Zacks Consensus Estimate of $2,025 million. Revenues were up 6.2% (or 2.9% in constant currency) for the fiscal year to $7,829 million, greater than the Zacks Consensus Estimate of $7,805 million.
On a geographic basis, domestic revenues rose 1.3% year over year to $843 million in the fourth quarter while overseas sales grew 16% (or 6.1% in constant currency) to $1,208 million. International sales were driven by sustained growth in emerging nations and robust safety sales.
Fourth Quarter Review by Segments
At BD Medical, worldwide revenues grew 10% (or 3.8% in constant currency) year over year to $1,055 million in the quarter, driven by healthy revenues from Diabetes Care, Pharmaceutical Systems products and international safety items.
Within BD Medical, sales from Medical Surgical Systems were up 6.7% year over year to $535 million. Diabetes Care sales increased 12.8% to $224.7 million while Pharmaceutical Systems revenues rose 14.4% to $294.5 million.
At BD Diagnostics, worldwide sales were up 8.6% (or 3.8% in constant currency) year over year to $642 million, on account of robust growth in both the Women’s Health as well as Cancer and Infectious Disease product lines. Preanalytical Systems revenues were up 7.2% to $328.6 million while Diagnostic Systems sales increased 10% to $313.4 million.
Global sales from the BD Biosciences unit increased 9.6% (or 4.7% in constant currency) year over year to $354 million driven by reagent and instrument sales in the Cell Analysis segment. Cell Analysis revenues rose 10.6% to $273.2 million while Discovery Labware sales increased 6.4% year over year to $81 million.
Margins and Expenses
Gross margin moved down a little to 51.3% in the reported quarter from 51.9% a year ago while operating margin dropped somewhat to 21.4% from 21.9% in the prior-year quarter. Consolidated operating costs and expenses rose 10.3% year over year to $1,612.6 million as Becton Dickinson spent more on R&D (up 2%) and selling and administrative (up 11.2%) expenses.
Outlook
Becton, Dickinson assumes revenues will increase 1% to 3% (or 2% to 4% in constant currency) for fiscal 2012. The company projects reported earnings per share (from continuing operations) in a band of $5.75 to $5.85 for fiscal 2012, lower than the current Zacks Consensus Estimate of $6.19. It intends to repurchase, subject to market-related conditions, $1.5 billion of its common stock during the upcoming fiscal year.
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.
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