Becton, Dickinson and Company (BDX) has announced first-quarter fiscal 2011 adjusted (excluding one-time items) earnings per share of $1.35, beating the Zacks Consensus Estimate of $1.29 while surpassing the year-ago figure of $1.30. Net income from continuing operations (on a reported basis) for the quarter increased 3.3% to about $314 million (or $1.35 a share).
Becton, Dickinson recorded revenues of $1.84 billion for the reported quarter, down 1.4% year over year (or 1.5% in constant currency), missing the Zacks Consensus Estimate of $1.89 billion.
Domestic sales amounted to $829 million, down 2.9% year over year, including 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), including a negative impact of 3% from the flu pandemic in fiscal 2010. As in the previous quarter, Becton, Dickinson again experienced higher growth in emerging markets, which was offset by the slowdown in European markets.
Segment-wise Results
In BD Medical, global revenues were $927 million, down 4.5% year over year (down 4.3% in constant currency) in the reported quarter. Higher revenues from Diabetes Care products were more than offset by an unfavorable comparison of 6% due to sales related to the H1N1 flu pandemic in fiscal 2010.
Among the sub-segments, Medical Surgical Systems was down 3.8% year over year (or 4.7% in constant currency) to $512.7 million in the first quarter, Diabetes Care was up 6.1% to $213.9 million and Pharmaceutical Systems dropped sharply by 15.3% (or 12.4% in constant currency) to $199.9 million.
In BD Diagnostics, global sales were $602 million, up 1% (or 0.6% in constant currency). The performance of this segment was driven by robust revenues from Preanalytical Systems’ safety-engineered products and Women’s Health and Cancer items from the Diagnostic Systems unit. With regard to the sub-segments, Preanalytical Systems moved up 3.9% to $312.6 million and Diagnostic Systems dipped 2.6% to $289.1 million.
In BD Biosciences, global sales were $314 million, up 3.7% (or 3.5% in constant currency). The favorable outcome was driven by cell analysis instrument as well as reagent sales. As for the sub-segments, Cell Analysis moved up 4.1% (or 4.2% in constant currency) to $240.7 million and Discovery Labware inched up 2.3% (or 1.2% in constant currency) to $73 million.
Gross margin edged up to 53% in the reported quarter from 52.1% a year ago while operating margin was 22.4%, lower than 23% in the prior-year quarter.
Recent Developments
On February 7, 2011, Becton announced a definitive agreement to take over Accuri Cytometers, an Ann Arbor-based company, which makes personal flow cytometers for use by researchers. The acquisition, whose terms were not disclosed, is synergistic with Becton’s strategy for its Cell Analysis sub-segment.
Outlook
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 any major short-term catalyst. 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. However, European revenues are expected to pick up.
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).
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