Becton Dickenson and the Fountain of Youth

Stock (Symbol)

Becton Dickenson (BDX)

Stock Price

$142

Sector

Healthcare

Data is as of

January 9, 2016

Expected to Report

Feb 3

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) has manufactured syringes, catheters, lab equipment, diagnostic tests, and other disposable items for hospitals since 1897. BDX is a conservative stock with excellent financial strength, stability, and a top safety rating of 1 from Value Line. It’s stock and profits grew around 10% a year the past decade in addition to a 2% dividend which has increased every year since 1972. Last year BDX kicked growth up a notch when it acquired CareFusion, a maker of precision drug dispensing equipment. The company said this merger will add 22% to 2016 EPS, and for a 10% grower that’s huge. More importantly now the company can offer a more complete menu of medical products to hospitals. This deal has other perks. BDX will save hundreds of millions on synergies and can also use its deep International network to sell CareFusion products, which had just a limited presence abroad. Overall, 2016 profits are expected to grow 17% in 2016, after a 5% to 6% haircut from currency exchange. BDX is a old-company which has found the fountain of youth. This conservative stock is delivering solid profit growth of around 20%, paying a 2% dividend, and it sells for 17x earnings.

One Year Chart

BDX has tried to make a couple runs higher yet was denied each time due to two market corrections. Along the bottom you can see profit growth got kicked up a notch a couple qtrs ago, and that looks to continue the next 2 qtrs, before simmering down to a more normalized 10% and 14% growth three and four qtrs out.

Fair Value

I like how profit growth has been up every year during the last ten years — even through the 2008-2009 recession. Also note the P/E fell during that period, then recovered to 20 by 2014. This seems like a re-run as the stock’s P/E is now 17 yet I feel it should be 20. I feel BDX has solid upside to its Fair Value.

Bottom Line

Becton Dickenson is an old-stable stock that’s kicked its growth up a notch with some new blood from CareFusion. This deal will add profits, subtract costs, and give International growth opportunity. Profit’s are growing around 20% now and analysts expect 13% growth long-term in addition to a 2% yield. BDX is one of my favorite stocks for investors in search of safety and ranks 4th of 35 stocks in the Conservative Portfolio Power Rankings.