Stock (Symbol)

Becton Dickinson (BDX)

Stock Price

$172

Sector

Healthcare

Data is as of

July 7, 2016

Expected to Report

Aug 4

Company Description

BDX is a global medical technology company engaged in the development, manufacture and sale of a range of medical supplies, devices, laboratory equipment and diagnostic products used by healthcare institutions, life science researchers, clinical laboratories. The Company operates through two segments: BD Medical and BD Life Sciences. The Company’s Life Sciences segment consists of the BD Diagnostics and BD Biosciences segments. The Company’s BD Medical segment focuses on providing solutions to reduce the spread of infection, enhance diabetes treatment and advance drug delivery. The Company’s BD Diagnostics provides products for the safe collection and transport of diagnostics specimens, as well as instruments and reagent systems. Its BD Biosciences provide diagnostic and research tools to life science researchers, clinical researchers, laboratory professionals and clinicians. Source: Thomson Financial

Sharek’s Take

Becton, Dickenson (BDX) manufactures medical supplies hospitals use on a daily basis. BDX has manufactured syringes, catheters, lab equipment, diagnostic tests, and other disposable items for hospitals since 1897. Last year BDX acquired CareFusion, a maker of precision drug dispensing equipment, and said this merger will save hundreds of millions through synergies and add 22% to 2016 EPS — which is huge for what is basically a 10% grower. What’s more is Becton Dickinson now offers a more complete menu of medical products to hospitals. Becton can also use its deep International network to sell CareFusion products, which had just a limited presence abroad. This stock has a top safety rating with excellent financial strength and stability, with an Estimated Long Term Growth Rate of 13% a year in addition to a 2% dividend which has increased every year since 1972. Although profit growth is expected to moderate now that CareFusion has been in the books a full year now, the company just beat the street and upped profit estimates so in my eyes the stock should still be hot. The only negative is last qtr I felt the $150 stock was worth $168 and now BDX is $172, so it’s not undervalued anymore.

One Year Chart

BDX had profit growth of 35% last qtr, beating the 25% estimate, as sales grew from $2 billion to $3 billion. The company upped 2016 estimates from $8.42 to $8.57 as well. Last qtr with the stock at $150 I said BDX had the potential to break out, and it’s up 15% since then. But going forward profits are set to moderate to 7%, 14%, 10% and 5% the next 4 qtrs and these didn’t really increase.

Fair Value

Becton Dickenson is a safe stable stock that’s grown profits every year for the last decade. But the P/E of 20 is not only around its highs but is also what the stock sold for during 2014 and 2015. Compared to prior qtrs, BDX has absorbed much of its near-term upside potential.

Bottom Line

Becton Dickinson has found new life with CareFusion, which has been a huge success as it added profits, subtract costs, and has given International growth opportunity, but we might be at the end of the roid-like surge in both profits and the stock price as 2017 profits are expected to climb just 11%. I’m lowering BDX in my Conservative Portfolio Power Rankings, as profit growth is expected to slow, but only from 5th to 8th. I would have moved it lower but most of the safe stocks are expensive as value has outperformed growth during the past year.