Becton Dickinson Makes a Great Buy of C.R. Bard

Stock (Symbol)

Becton Dickinson (BDX)

Stock Price

$195

Sector

Healthcare

Data is as of

July 1, 2017

Expected to Report

Aug 1

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. Source: Thomson Financial

Sharek’s Take

Becton Dickinson (BDX) is acquiring C.R. Bard (BCR) for $317 a share. To me this is a great move as it merges two companies with long histories of providing equipment to hospitals. But its more than just medical supplies, both stocks are very safe 100 year old companies and have provided investors with double-digit returns for many years. 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 gave Becton, Dickinson a more complete menu of medical products to hospitals and Becton can also use its deep International network to sell CareFusion products. And now C.R. Bard, which was founded in 1907, takes things to a whole other level with its catheters and stents. BDX is a very safe stock that has produced growth around twice the rate of the S&P 500. It possesses 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. The P/E is 21, which is about where it should be, but synergies from BCR will likely cause profits to come in above estimates for the next year or two.

One Year Chart

Last qtr BDX delivered 6% profit growth and beat estimates of 2% growth. Sales were -3% due to the company selling off a division. Estimates for the next 4 qtrs are 4%, 12%, 5% and 7%. This stock has been rising as the C.R.Bard purchase will lead to higher earnings down-the-road.

Fair Value

My Fair Value on BDX is 21x earnings, or $198 a share. With the stock around $195 now it’s not “on sale” but this is still a good entry point for this Blue Chip stock.

Bottom Line

Becton, Dickinson is one of the finest publicly traded companies out there, and now with C.R. Bard the company is even better. This company has been in business more than a century and has raised its dividend for close to 50 years. During the last decade BDX has growth its profits 10% a year, and the stock has grown 10% a year as well. Investors also received a 2% yield along the way. But what I like most is Becton Dickinson has a enormous catalog of healthcare instruments and supplies that are used by hospitals every day. BDX ranks 19th in the Conservative Portfolio Power Rankings.