Becton, Dickinson and Company's (NYSE: BDX) first fiscal quarter of 2019 will be the last one with wacky year-over-year comparisons because of the addition of C.R. Bard. Fortunately, as it's done for the last three quarters, the company was kind enough to present the comparisons on a comparable currency-neutral basis as if the companies had been together in the year-ago quarter.
BD results: The raw numbers
Income from operations
Earnings per share (EPS)
Data source: Becton, Dickinson and Co.
What happened with BD this quarter?
- On a comparable currency-neutral basis, overall revenue increased 2% year over year.
- The medical segment grew sales 5.2% on that same comparable currency-neutral basis, driven by medication management solutions, which was up 7% year over year. There were some orders in the segment that got pushed forward, which helped the most recent quarter but will hurt year-over-year comparisons for the second quarter.
- Revenue in the life sciences segment increased 4.7% on a comparable currency-neutral basis. It was a tough comparator to last year, which had a strong flu season. On the plus side, preanalytical systems revenue grew 7.6%.
- Interventional segment sales grew 5.7% on a comparable currency-neutral basis. The reintroduction of the Progel surgical sealant helped surgery revenue increase 10%. Urology and critical-care products also had a nice quarter, up 3% thanks to the introduction of new products in urological acute care.
- The GAAP numbers for income from operations and EPS are inflated due to the sale of BD's advanced bioprocessing business and tax reform in the year-ago quarter, so adjusted EPS is the best way to measure year-over-year changes in the bottom line.
Image source: Getty Images.
What management had to say
Vincent Forlenza, BD's chairman and CEO, talked about Europe and the Middle East (EMA) and how the big tender orders can affect year-over-year comparisons:
What you actually saw was a decrease in EMA, which was actually two things -- a strong comp, but also these tenders, which have moved from the first quarter into the second, third, and fourth. And so, we're going to see a very strong bounce-back in EMA. We have the orders. That's why I am so confident. It's a matter, of course, of setting up the financing, which is something that takes up a bit of time to do.
BD's president and chief operating officer Thomas Polen highlighted revenue synergies -- cross-selling products from the two legacy businesses: "So, in FY '19, we see revenue synergies to be -- think about it in the tens of [basis points] -- relatively minimal to no impact to EPS benefit in FY '19, because we're investing behind getting those initiatives. We start seeing EPS benefits of the revenue synergies starting next year more meaningfully."
Management reiterated fiscal 2019 guidance for revenue to grow by 5% to 6% on a comparable currency-neutral basis.
While revenue synergies may take awhile to emerge, as Polen mentioned, the company expects to achieve $100 million in cost synergies this fiscal year, on its way to $300 million in annualized cost synergies over the three years after the deal closed.
Those cost savings are expected to help earnings grow much faster than revenue, with guidance for growth of 13% to 14% on a currency-neutral basis.
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