Becton, Dickinson (BDX) Q4 Earnings Beat, FY19 View Strong

Becton, Dickinson and Company (NYSE:BDX) posted fourth-quarter fiscal 2018 earnings of per share $2.93, which surpassed the Zacks Consensus Estimate by a penny. The bottom-line also improved 22.1% on a year-over-year basis and 24.6% at constant currency (cc).

Becton Dickinson, also known as BD, raked in revenues of $4.4 billion and outpaced the Zacks Consensus Estimate of $4.36 billion. The reported figure surged 39% from the year-ago quarter number, primarily owing to the acquisition of C. R. Bard. At cc, revenues rose 8.4%.

In a year’s time, the Zacks Rank #3 (Hold) stock has rallied 7.3%, outperforming the industry’s 3% growth and the S&P 500 index’s 5.8% gain.

Fiscal 2018 at a Glance

For fiscal 2018, BD’s worldwide revenues totaled $15.98 billion, which trumped the Zacks Consensus Estimate of $15.94 billion. The top line increased 32.2% from the prior-year’s tally, courtesy of the acquisition of C.R. Bard. At cc, revenues grew 5.8%.

Adjusted earnings per share of $11.01 came in line with the Zacks Consensus Estimate. The metric also surged 16.1% from the year-ago figure and 12.3% at cc.

BD Medical posted revenues of $8.62 billion for the full year (53.9% of net sales), while BD Life Sciences revenues grossed $4.33 billion (27.1% of net sales). BD Interventional revenues came in at $3.04 billion (19% of net sales).

Segment Details

BD Medical

In the quarter under review, BD Medical posted worldwide revenues of $2.35 billion, up 20.7% from the year-ago quarter and 10.1% at cc. The upside was driven by strength in the Medication Delivery Solutions, Medication Management Solutions and Pharmaceutical systems. Per management, the improvement can be attributed to the C.R. Bard acquisition.

BD Life Sciences

Worldwide revenues in the segment totaled $1.11 billion, up 5.4% year over year and 6.9% at cc. Per management, revenues were strong across the Preanalytical Systems, Diagnostic Systems and Biosciences units.

BD Interventional

This segment posted worldwide revenues of $0.95 billion, significantly up from the year-ago figure of $172 million. At cc, the segment grew 6%. Surgery, Peripheral Intervention and Urology and Critical care revenues skyrocketed in the fourth quarter.

Geographic Results

US

In the reported quarter, revenues in the United States shot up 48.9% to $2.45 billion. Revenues grew 8.7% at cc. Per management, revenue growth in the United States was primarily driven by very strong performance in the Medication Management Solutions and Pharmaceutical Systems units within the BD Medical segment.

For full year, domestic revenues totaled $8.77 billion, up 34.8% on a year-over-year basis and 5% at cc.

International

Revenues outside the United States grossed $1.95 billion, up 28.4% from the year-ago quarter and 7.9% at cc. Per management, overseas revenue growth was backed by strong performance across all three segments in the fourth quarter.

For the full year, international revenues totaled $7.22 billion, up 29.1% on a year-over-year basis and 7% at cc.

Margin Analysis

In the fiscal fourth quarter, gross profit amounted to $2.09 billion, up 34.6% from the prior-year quarter tally. Gross margin was 47.5%, down 160 basis points (bps).

Operating income in the quarter grossed $570 million, reflecting an improvement of 28.7% from the prior-year quarter.

Adjusted operating income summed $710 million, up 27% on a year-over-year basis. As a percentage of revenues, operating margin in the quarter was 16.1%, which contracted 160 bps year over year.

Guidance

On a reported basis, BD expects fiscal 2019 revenues to increase 8.5-9.5%, primarily owing to the C. R. Bard acquisition. At cc, the same metric is anticipated to increase 5-6%. The Zacks Consensus Estimate is pegged at $17.71 billion.

For fiscal 2019, adjusted earnings per share are projected between $12.05-$12.15, reflecting growth of 13-14% at cc. Notably, the Zacks Consensus Estimate is pinned at $12.62, above the guided range.

Notably, fiscal 2019 earnings per share expectations include high-single digit accretion from the C. R. Bard buyout.

Summing Up

Becton, Dickinson wrapped up the fiscal fourth quarter on a solid note, with both earnings and revenues beating the consensus mark. Also, the company continues to gain from its C.R. Bard acquisition. Notably, BD expects the buyout to contribute significantly to earnings in fiscal 2019. Strong performance by the core BD Medical and Life Sciences segment buoys too optimism. Domestic and international revenues also increased year over year in the quarter under review. A bullish guidance for fiscal 2019 is also indicative of brighter prospects ahead.

On the flip side, gross and operating margin contraction raise concerns. Management foresees a sales impact from Hurricane Maria in Puerto Rico and negative impact from foreign currency on Bard's business in first quarter of fiscal 2019. Stiff competition also adds to the woes.

Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space that reported impressive earnings this season are Intuitive Surgical (NASDAQ:ISRG) , Stryker Corporation (NYSE:SYK) and Merit Medical Systems, Inc. (NASDAQ:MMSI) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted earnings per share of $2.83, which exceeded the Zacks Consensus Estimate of $2.65. Revenues came in at $920.9 million, surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted earnings per share of $1.69, came ahead of the Zacks Consensus Estimate by a penny. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted earnings per share of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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