Becton Dickinson has a Strategy for Sustainable Growth

Stock (Symbol)

Becton Dickinson (BDX)

Stock Price


Data is as of
March 13, 2017
Expected to Report
May 3 – 8
Company Description
bectondickinson_labBDX 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
David SharekBecton Dickinson (BDX) has a strategy for growth with a pathway to a target of sustainable 5% revenue growth and 10% profit growth. Ten-percent seems to be BDX’s lucky number, as profits have compounded at 10% per year the past decade, the company is expected to grow profits 10% this year, and analysts have a 10% Estimated Long-Term Growth Rate on the stock. Becton Dickinson manufactured syringes, catheters, lab equipment, diagnostic tests, and other disposable items for hospitals since 1897. The company is a perennial 8% to 10% grower, unless it makes a big acquisition that causes profits to surge like in 2015 when it acquired CareFusion, a maker of precision drug dispensing equipment. CareFusion gives Becton, Dickinson a more complete menu of medical products to hospitals and Becton can also use its deep International network to sell CareFusion products, which in the past had just a limited presence abroad. Its plan for sustainable growth is centered on three components: (1) new products launching now or within the next 2 yrs, (2) creating solutions to healthcare issues (3) geographic expansion including Carefusion. This is a very safe and sound stock that has produced growth around twice the rate of the S&P 500. BDX has an Est. LTG of 10% per year in addition to a 2% yield. The company has a history of growth dating back a century, and a dividend that’s been raised for close to 50 years. But at 20x earnings this $185 stock is slightly above my 2017 Fair Value of $179. This is a perfect addition for a conservative investor’s portfolio, but try to get it at a little better price.
One Year Chart
This stock’s been excellent during the past year, but the P/E was 18 both in the year ago period and last qtr. The current P/E of 20 is a tad high in my opinion. Last qtr the company delivered -5% sales growth (down due to divestitures) and 19% profit growth which cruised past the 8% estimate. BDX had been on a long string of beating the street, until it barely beat 2QtrsAgo. This recent beat but the stock back on track. The negative part of this report is profit estimates declined a bit this qtr and now Estimates for the next 4 qtrs are 2%, 5%, 13% and 4%. To view the Earnings Table click here.
Fair Value
I love that profits have grown every year in this Profit History table. Becton Dickinson is like a machine. Notice this stock had a P/E of around 15 from 2009-2013, but the stock market in general was “on sale” with P/Es lower than they are now. My current Fair Value is a P/E of 19.
Bottom Line
Becton, Dickinson is one of the finest publicly traded companies out there. It’s been around more than a century and has raised its dividend for close to 50 years. I am amazed BDX has been able to grow profits at 10% per year long-term — in addition to paying a 2% yield — and I feel this is an excellent investment for retirees. My only issue is the stock is slightly above my 2017 Fair Value so perhaps wait for a dip to buy in. BDX ranks 21st of 30 stocks in the Conservative Portfolio Power Rankings.
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