Becton, Dickinson and Company (BDX) reported adjusted first-quarter fiscal 2012 earnings per share of $1.21, beating the Zacks Consensus Estimate of $1.17 but trailing the year-ago earnings of $1.35 per share. The year-over-year decline was on account of higher raw material prices, tough pricing comparisons and rising expenditures for recent acquisitions.
Net income (as reported) for the first quarter dropped 16.8% year over year to roughly $263 million (or $1.21 a share).
Becton Dickinson posted first quarter sales of $1,888 million, up 2.5% (or 2.4% in constant currency) year over year, beating the Zacks Consensus Estimate of $1,886 million.
On a geographic basis, U.S. revenues were flat year over year at $829 million while ex-U.S. revenues moved up 4.5% (or 4.4% in constant currency) to $1,059 million. International sales were driven by sustained growth in emerging nations and robust safety sales.
First Quarter Review by Segments
At BD Medical, global revenues increased 2.6% (or 2.6% in constant currency) year over year to $950 million in the quarter, driven by healthy revenues from Diabetes Care and international safety items.
Within BD Medical, sales from Medical Surgical Systems were up 1.9% year over year to $522.3 million. Diabetes Care sales rose 5.6% to $225.9 million while Pharmaceutical Systems revenues were up 1.1% to $202.2 million.
At BD Diagnostics, global revenues were up 3.2% (or 3.3% in constant currency) year over year to $621 million, on account of robust growth in both the Women’s Health and Cancer as well as safety engineered products of Preanalytical Systems. Preanalytical Systems revenues rose 1.3% to $316.6 million while Diagnostic Systems sales were up 5.2% to $304.1 million.
Worldwide sales from the BD Biosciences unit increased 0.9% (or 0.3% in constant currency) year over year to $317 million driven by clinical reagent sales in the Cell Analysis segment. Cell Analysis revenue rose 1.2% to $243.6 million while Discovery Labware sales were approximately flat at $72.9 million.
Margins and Expenses
Gross margin moved down to 50.9% in the reported quarter from 53% a year ago while operating margin dropped somewhat to 19% from 22.4% in the prior-year quarter. Consolidated operating costs and expenses rose 7% year over year to $1,529.1 million as Becton Dickinson spent more on selling and administrative (up 9.2%) expenses but less on R&D (down 1.4%).
Outlook
Becton Dickinson reiterated its sales growth guidance of 2% to 4% in constant currency but reduced its reported revenue growth forecast, for fiscal 2012, to zero from a range of 1% to 3% earlier. The company lowered its diluted earnings per share (from continuing operations) target for fiscal 2012 to a range of $5.60 to $5.70 (earlier $5.75 to $5.85). 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.
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. The stock currently retains a Zacks #4 Rank, which translates into a short-term “Sell” recommendation.
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