BD (BDX) Beats on Q3 Earnings and Revenues, Raises FY22 View

Becton, Dickinson and Company BDX, popularly known as BD, delivered adjusted earnings per share (EPS) of $2.66 in the third quarter of fiscal 2022, up 16.7% year over year. The figure surpassed the Zacks Consensus Estimate by 6.8%.

The adjustments include expenses related to purchase accounting adjustments and integration costs, among others.

GAAP EPS for the quarter was $1.28, reflecting a fall of 3% from the year-earlier figure.

Revenues in Detail

BD registered revenues of $4.64 billion in the fiscal third quarter, up 0.7% year over year. The figure surpassed the Zacks Consensus Estimate by 4%.

At constant exchange rate (CER), revenues climbed 3.8%.

The top-line improvement primarily resulted from strength in base revenue growth. However, the overall top-line improvement was partially offset by a fall in worldwide COVID-only testing revenues, which amounted to $76 million (down 74.7% from the prior-year quarter).

Base revenues were $4.57 billion in the fiscal third quarter, up 6% year over year on a reported basis and 9.3% at CER.

Base organic revenue growth for the fiscal third quarter was 5.5% on a reported basis and 8.8% at CER.

Segment Details

BD’s operations consist of three worldwide business segments — BD Medical, BD Life Sciences and BD Interventional.

For the quarter under review, BD Medical reported worldwide revenues of $2.19 billion, up 4.7% from the year-ago quarter on a reported basis and 7.9% at CER. Per management, this upside can be attributed to strong performance in Medication Delivery Solutions and Pharmaceutical Systems units.

Worldwide revenues in the BD Life Sciences segment totaled $1.31 billion, down 8.7% year over year on a reported basis and down 5.1% at CER. The decline resulted primarily from the Integrated Diagnostic Solutions (IDS) unit’s fall in COVID-only testing revenues. However, this was partially offset by the IDS unit’s base-business growth (driven by continued adoption of BD’s broader respiratory panel and leveraging the increased BD Max installed base, and growth in specimen management that reflects price management and continued production increases that enabled it to meet robust demand) and strength in the Biosciences unit.

BD Interventional segment generated worldwide revenues of $1.14 billion, up 5.5% from the year-ago quarter on a reported basis and 7.9% at CER. This was owing to strength across the segment.

Geographic Results

In the fiscal third quarter, revenues in the United States improved 9% to $2.64 billion.

International revenues grossed $1.99 billion, down 8.4% from the year-ago quarter on a reported basis and 1.9% at CER.

Becton, Dickinson and Company Price, Consensus and EPS Surprise

Becton, Dickinson and Company Price, Consensus and EPS Surprise

Becton, Dickinson and Company price-consensus-eps-surprise-chart | Becton, Dickinson and Company Quote

Margin Analysis

In the quarter under review, BD’s gross profit climbed 5.6% to $2.07 billion. Gross margin expanded 204 basis points (bps) to 44.5%.

Selling and administrative expenses fell 4.3% to $1.15 billion. Research and development expenses declined 4.5% year over year to $315 million. Adjusted operating expenses of $1.46 billion decreased 4.3% year over year.

Adjusted operating profit totaled $603 million, reflecting a 40.9% surge from the prior-year quarter. Adjusted operating margin in the fiscal third quarter expanded 370 bps to 12.9%.

Financial Position

BD exited the third quarter of fiscal 2022 with cash and cash equivalents, and short-term investments of $2.57 billion compared with $3.16 billion at the end of fiscal second quarter. Total debt (including current debt obligations) at the end of the third quarter of fiscal 2022 was $16.37 billion compared with $18.64 billion at the end of fiscal second quarter.

Cumulative net cash flow from operating activities at the end of the third quarter of fiscal 2022 was $1.49 billion compared with $3.29 billion a year ago.

Meanwhile, BD has a consistent dividend-paying history, with its five-year annualized dividend growth being 3.65%.

Fiscal 2022 Guidance

BD has raised its financial outlook for fiscal 2022.

BD now projects its full fiscal year revenues to be in the range of $18.75 billion-$18.83 billion, up from the earlier projection of $18.5 billion-$18.7 billion. The Zacks Consensus Estimate for revenues is pegged at $18.61 billion.

The revenue projections for fiscal 2022 now include base-business revenue growth of 8.75-9.25% at CER, up from the earlier projection of 7.25-8.25%. The outlook now estimates up to $500 million in COVID-19-only diagnostic testing revenues, up from the earlier projection of $450 million.

For the full fiscal year, adjusted EPS is now anticipated to be $11.28-$11.35, up from the previously expected range of $11.15-$11.30. The Zacks Consensus Estimate for the same is pegged at $11.21.

Our Take

BD exited the third quarter of fiscal 2022 with better-than-expected results. Improvement in the overall top line and base revenues are impressive. The year-over-year uptick in adjusted EPS is also encouraging. Robust performances by the majority of the segments and in the United States are impressive. BD’s completion of the Parata Systems buyout to enter high-growth pharmacy automation market segment and MedKeeper buyout look promising.

The company also launched BD COR System in the United States and the CE-Marked BD MAX respiratory viral panel for COVID-19, Influenza A/B and Respiratory Syncytial Virus, which raised our optimism. BD’s receipt of the CE Mark for COVID-19 and Influenza A/B combination test for BD COR MX is another quarterly highlight.

The expansion of both margins is a plus. A raised financial outlook for the full fiscal year is also promising.

However, the year-over-year decline in BD Life Sciences and international revenues is worrying. Lower COVID-only testing revenues are discouraging from a business perspective.

Zacks Rank and Other Key Picks

BD currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, Humana Inc. HUM and Alkermes plc ALKS.

Quest Diagnostics, carrying a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has an earnings yield of 7% compared with the industry’s 3.2%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.

Humana, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $8.67, which beat the Zacks Consensus Estimate by 13%. Revenues of $23.7 billion outpaced the consensus mark by 1.2%.

Humana has an estimated long-term growth rate of 13.5%. HUM’s earnings surpassed estimates in all the trailing four quarters, the average being 9.1%.

Alkermes reported second-quarter 2022 adjusted EPS of 6 cents, which surpassed the Zacks Consensus Estimate by 50%. Second-quarter revenues of $276.2 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.

Alkermes has an estimated long-term growth rate of 24.9%. ALKS’s earnings surpassed estimates in all the trailing four quarters, the average being 325.5%.

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