Becton Dickinson: Strengths, Weaknesses, Opportunities, and Threats

Becton Dickinson's (NYSE: BDX  ) second-quarter earnings report is a good reason to give the company a onceover with a SWOT -- Strengths, Weaknesses, Opportunities, and Threats -- analysis. Becton met analysts' expectations for revenue and earnings beat estimates. The market liked the report, injecting more than $2.50 to the share price and send sending it to a new high.

Here's a business snapshot.

Company Name

Becton Dickinson (NYSE: BDX  )

One sentence statement of operations

Becton Dickinson manufactures and sells a broad range of medical supplies, devices, laboratory equipment and diagnostic products.

Recent price

$96.16

Market Cap

$18.65 billion

Forward P/E (next 12 months' EPS)

15.4

Dividend Yield

2.1% with 25% payout ratio

Source: Yahoo! Finance and Becton Dickinson home page.

Strengths:

  • Becton is a member of the S&P 500 Dividend Aristocrats -- S&P 500 companies that have raised their dividend every year for at least 25 years. In Becton's case, the string is 41 years.
  • The company's share repurchase plan is actually reducing shares outstanding.
  • Company guidance for FY2013 revenue and earnings were both raised.

Weaknesses:

  • The Affordable Care Act is starting to ding earnings. This quarter, new medical device taxes took five cents per share out of the bottom line. The tax is expected to cost Becton $45 million this fiscal year.
  • Gross margin and operating margin are down slightly compared to the year-ago quarter.

Opportunities:

  • Emerging markets operations account for just under 25% of revenues and have a solid double-digit growth rate.
  • The acquisition of Cato Software Solutions opens new business lines in medical safety and error prevention.
  • Becton has launched a number of new products recently, such as prefilled injectables, and has several new products in the pipeline.  Becton has a geographically diverse business base with more than half its revenues coming from outside the U.S.

Threats:

  • Health care is a hot topic in politics and taxes. Product approvals or regulations can pose a threat to operations or profitability.
  • That geographically diverse base brings currency exchange rate risk along with it. Currency exchange clipped 1.5% off year-over-year earnings growth last quarter. 

Becton isn't an exciting stock -- and that's a good thing. Revenue growth of 3%-4% and earnings growth rates of 6% or so aren't going to make headlines. But combine those moderate growth rates with a low payout ratio and a business with demand in every part of the economic cycle, and Becton is positioned to keep making those annual dividend hikes income investors count on. I own shares in Becton and believe it's an excellent candidate for investors looking for steady, growing income.

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