Please ensure Javascript is enabled for purposes of website accessibility

Becton, Dickinson Starts the Bard Integration Off on a Solid Note

By Brian Orelli, PhD – May 7, 2018 at 7:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The medical supply company looks for margin expansion in the coming quarters.

Becton, Dickinson (BDX 1.49%) reported wacky results for its second fiscal quarter. This is the first quarter that the medical supply company has included results from its acquisition of C.R. Bard. But looking at the two companies on a comparable basis, it was a solid quarter for the newly combined company.

Becton, Dickinson results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$4.22 billion

$2.97 billion

42.2%

Income from operations

$183 million

$446 million

(59%)

Earnings per share (EPS)

($0.19)

$1.58

N/A

Adjusted EPS

$2.65

$2.30

15.2%

Data source: Becton, Dickinson.

What happened with Becton, Dickinson this quarter?

  • Looking at the the companies individually, revenue for the old Becton, Dickinson grew 5.7% on a comparable basis, while revenue for Bard grew 8.5% on a legacy basis.
  • The diagnostic systems segment led the way with revenue growth of 12.6% on a comparable currency-neutral basis, thanks in large part to a strong flu season. The BD MAX molecular platform, which automates bacterial testing, also performed well.
  • The biosciences segment, which makes scientific equipment, and the peripheral intervention segment, which sells stents and balloons and other medical intervention devices, also had good quarters, up 8.9% and 10.9% on a comparable currency-neutral basis, respectively.
  • With costs of the acquisition flowing into the GAAP numbers, adjusted EPS is the best way to compare Becton, Dickinson year over year, although it includes some benefit from changes in exchange rates. At a currency-neutral basis, adjusted EPS was still up a solid 7.8% year over year.
  • The company has already started paying down debt it took on from the Bard acquisition, with its gross leverage ratio down to 4.5. The company plans to get the ratio below 3.0 over three years.
Doctor talking to patient in exam room

Image source: Getty Images.

What management had to say

When asked about any surprises that have cropped up for the integration of Bard, chairman and CEO Vincent Forlenza could only think of a positive one, stating:

I think on the positive side, we thought the cultures were very similar, and they are more similar than we expected. They are very customer-driven and focused and purpose-driven, and that's been a huge positive. The way teams have come together, even quicker than they did on the CareFusion integration, has been a very strong positive.

Of course, a happy integration is nice, but what's ultimately important in bringing the two companies together is synergies that can reduce costs, which CFO Christopher Reidy stressed the company was on target to do. Reidy said, "I'd like to point out that we continue to expect to deliver significant underlying margin expansion of 200 basis points to 250 basis points this fiscal year, which is in addition to approximately 500 basis points of margin expansion over the last three years."

Looking forward

After the strong fiscal second quarter, management set revenue guidance on a comparable currency-neutral basis for its fiscal year at 5% to 5.5%, which is the high end of its prior range.

On the bottom line, management is sticking with its adjusted EPS guidance on a currency-neutral basis for year-over-year growth of 12%. Apparently, the higher revenue growth will be eaten up by increased clinical trial expenses and increased material costs. The former can be seen as an investment in future revenue growth, but the latter increase in material costs is something that investors should keep an eye on, especially as the company tries to improve its post-acquisition margin.

Brian Orelli has no position in any of the stocks mentioned. The Motley Fool recommends Becton Dickinson. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Becton, Dickinson and Company Stock Quote
Becton, Dickinson and Company
BDX
$231.74 (1.49%) $3.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.