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Here's Why Becton Dickinson Fell Today

By Brian Orelli, PhD - Updated Feb 6, 2020 at 12:48PM

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Issues with its Alaris infusion system will take longer to fix, forcing the company to lower fiscal 2020 guidance.

What happened

Shares of Becton Dickinson (BDX 0.36%) are down 9.7% at 12:59 p.m. EST after the company lowered its guidance for fiscal year 2020. The lower guidance is due to news that it will take longer than expected to resolve software issues for its Alaris infusion system, which are used by 70% of patients undergoing infusion therapy.

So what

To solve the issue with the Alaris infusion system, the company will need to make a regulatory filing with the Food and Drug Administration (FDA), which Becton Dickinson thinks it can accomplish during its fourth fiscal quarter (July to September). In the meantime, the company is working with the FDA so the systems can be used under medical necessity.

Technician pushing a button on an Alaris infusion system

Alaris infusion system. Image source: Becton Dickinson.

The lost revenue from not selling the Alaris infusion systems, as well as the increased costs associated with fixing the problem forced management to pare down its fiscal 2020 guidance. The company now expects revenue to increase by 1.5% to 2.5% as reported, or 2.5% to 3.5% on a currency-neutral basis. Previous guidance was for growth of 4% to 4.5% as reported, or 5% to 5.5% when currency changes are excluded.

On the bottom line, management now expects fiscal 2020 adjusted earnings per share to fall in the $11.90 to $12.10 range, down from previous guidance of $12.50 to $12.65. The new adjusted earnings guidance represents 2% to 3.5% growth, or 4% to 5.5% on a currency-neutral basis.

Now what

While the lowered guidance is disappointing, the sales for new systems may not be completely lost. With the healthcare company dominating the market, hospitals and infusion centers may choose to just wait for the remedy and buy systems in the next fiscal quarter rather than change brands and have a mix of machines. That assumes, of course, Becton Dickinson can fix the issue to regulators' standards quickly and the problem doesn't tarnish the company's image.

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

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