Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Becton, Dickinson Rose 17.6% in July

By John Bromels – Aug 10, 2020 at 1:54AM

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

Investors had high hopes for its rapid-response COVID-19 test.

What happened

Shares of medical devicemaker Becton, Dickinson (BDX 1.08%) jumped 17.6% in July, according to data from S&P Global Market Intelligence. At the end of the month, the company had more than erased the losses it suffered earlier in the year. 

So what

Investors have been sharply attuned to COVID-19 developments, so when Becton, Dickinson -- commonly abbreviated as BD -- announced on July 6 that the FDA had approved its rapid-response coronavirus antigen test for emergency use, the market immediately began sending shares skyward.

A composite image of various medical devices.

Image source: Getty Images.

The test uses a chromatographic immunoassay to detect the presence of coronavirus using antibodies. It's performed using BD's existing Veritor testing system. The Veritor is a portable handheld machine that's already in use in more than 25,000 healthcare facilities across the U.S., where it's primarily used for flu tests. BD says the new coronavirus test can produce results from a nasal swab in about 15 minutes.

BD is expected to quickly ramp up production of the tests and anticipates being able to produce 2 million tests per week by the end of September. In late July, the U.S. government committed $24 million to help the company ramp up production.

Now what

Despite BD's promising COVID-19 test, the market wasn't thrilled with its third-quarter earnings report, released on Aug. 6. While earnings topped estimates, revenue was lower than Wall Street was hoping. In addition, the company issued fiscal 2020 guidance calling for a 2.5% to 3% drop in revenue and a 14% to 16% decline in earnings from the prior year. That's despite shipping more Veritor readers in one month than the company normally ships in an entire year, along with strong demand for the company's syringes and needles for potential COVID-19 vaccination campaigns.

The healthcare company's shares fell about 8% on the poor guidance. On the earnings call, BD declined to offer any projections beyond the current fiscal year, which ends on Sept. 30. Management was uncertain about fiscal 2021, as strong COVID-19-related sales may be offset by declines in sales of equipment for elective procedures. 

John Bromels has no position in any of the stocks mentioned. The Motley Fool recommends Becton, Dickinson. The Motley Fool has a disclosure policy.

Premium Investing Services

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