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BD (BDX) Q3 Earnings Surpass Estimates, Margins Expand

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Becton, Dickinson and Company (BDX - Free Report) , popularly known as BD, delivered adjusted earnings per share (EPS) of $3.50 in the third quarter of fiscal 2024, up 18.2% year over year. The figure topped the Zacks Consensus Estimate by 5.7%.

The adjustments include expenses related to purchase accounting adjustments and integration costs, among others.

GAAP EPS for the quarter was $1.68, reflecting an improvement of 23.5% from the year-earlier figure.

Revenues in Detail

BD registered revenues of $4.99 billion in the fiscal third quarter, up 2.3% year over year. However, the figure missed the Zacks Consensus Estimate by 1.6%.

At constant exchange rate (CER), revenues climbed 2.9%.

Robust performances by all three segments drove the top-line improvement.

Adjusted revenues (excluding the recognition of accruals resulting from recent developments relating to the Italian government medical device payback legislation and another legal matter, and which substantially relate to years prior to the current fiscal year) were $5.06 billion in the fiscal third quarter, up 3.7% year over year. At CER, revenues climbed 4.3%. The organic revenue growth for the fiscal third quarter was 5.2%.

Segment Details

BD’s operations consist of three worldwide business segments — BD Medical, BD Life Sciences and BD Interventional.

For the quarter under review, BD Medical reported worldwide revenues of $2.56 billion, up 5.1% from the year-ago quarter on a reported basis, 5.6% at CER and 5.6% on an organic basis. Per management, this upside can be attributed to strength in Medication Management Solutions and Medication Delivery Solutions business units. This compares to Zacks Consensus Estimate of fiscal third-quarter segmental revenues of $2.52 billion.

Worldwide revenues in the BD Life Sciences segment totaled $1.26 billion, up 2.7% year over year on a reported basis, 3.5% at CER and 3.5% on an organic basis. The segment’s performance was driven by the Integrated Diagnostic Solutions (IDS) business unit. This compares to Zacks Consensus Estimate of fiscal third-quarter segmental revenues of $1.28 billion.

BD Interventional segment generated worldwide revenues of $1.24 billion, up 1.8% from the year-ago quarter on a reported basis, 2.6% at CER and 6.4% on an organic basis. The segment’s organic revenue growth was driven by performance across the segment. This compares to Zacks Consensus Estimate of fiscal third-quarter segmental revenues of $1.26 billion.

Geographic Results

In the third quarter of fiscal 2024, revenues in the United States improved 4.3% to $2.89 billion. This compares to Zacks Consensus Estimate of revenues of $2.93 billion.

Adjusted U.S. revenues in the third quarter of fiscal 2024 were $2.89 billion, up 4.5% year over year.

International revenues grossed $2.09 billion, down 0.3% from the year-ago quarter on a reported basis but up 1.1% at CER. This compares to Zacks Consensus Estimate of revenues of $2.13 billion.

Adjusted International revenues were $2.16 billion, up 2.6% on a reported basis and 4% at CER.

Margin Analysis

In the quarter under review, BD’s gross profit increased 9.9% to $2.31 billion. The gross margin expanded 318 basis points (bps) to 46.2%.

Selling and administrative expenses increased 0.5% to $1.19 billion. Research and development expenses decreased 2.3% year over year to $299 million. Adjusted operating expenses of $1.49 billion declined 0.1% year over year.

Adjusted operating profit totaled $812 million, reflecting a 34.4% uptick from the year-ago quarter. The adjusted operating margin in the fiscal third quarter expanded 389 bps to 16.3%.

Financial Position

BD exited third-quarter fiscal 2024 with cash and cash equivalents and short-term investments of $5.31 billion compared with $3.18 billion at the fiscal second-quarter end. Total debt (including current debt obligations) at the end of third-quarter fiscal 2024 was $19.32 billion compared with $18.01 billion at the fiscal second-quarter end.

Cumulative net cash provided by continuing operating activities at the end of third-quarter fiscal 2024 was $2.67 billion compared with $1.67 billion a year ago.

Meanwhile, BD has a consistent dividend-paying history, with its five-year annualized dividend growth being 4.66%.

Fiscal 2024 Guidance

BD has revised its financial outlook for fiscal 2024.

BD now projects its full fiscal year revenues to be $20.1 billion (up 3.7% from the comparable fiscal 2023 period), narrowed from the earlier projection of $20.1 billion-$20.3 billion. The Zacks Consensus Estimate is pegged at $20.22 billion.

Adjusted revenues are expected to be in the range of $20.1 billion-$20.2 billion.

For fiscal 2024, organic revenue growth is now expected to be between 5% and 5.25% from the comparable fiscal 2023 period, lowered from the earlier projection of 5.5% and 6.25%.

For the full fiscal year, adjusted EPS is now anticipated to be in the range of $13.05-$13.15 (representing growth of 6.9-7.7% from the comparable fiscal 2023 period), narrowed from the earlier projection of $12.95-$13.15 (representing growth of 6.1-7.7%). The Zacks Consensus Estimate is pegged at $13.04.

Our Take

BD exited the third quarter of fiscal 2024 with better-than-expected earnings. Solid top-line results, along with improvements in organic revenues and bottom-line performances, were impressive. Robust performances by all segments and both geographic regions (on an adjusted basis) were encouraging. BD’s domestic revenues were also up on a reported basis, while International revenues were up at CER, which were also impressive. Strength in most of BD’s segments' business units during the reported quarter was also promising. The expansion of both margins bodes well.

In June, BD announced a definitive agreement to acquire Edwards Lifesciences' Critical Care Product Group to enhance its portfolio of smart connected care solutions and AI-based technologies. In May, BD’s IDS business unit announced the FDA’s approval for the self-collection of samples for cervical cancer screening in a healthcare setting, while the Biosciences (BDB) business unit announced the commercial launch of the BD Rhapsody ATAC-Seq Assay during the quarter. These look promising for the stock.

However, BD’s lower-than-expected revenues and lower International revenues on a reported basis were discouraging. The BDB business unit’s performance reflected transitory market dynamics that resulted in lower market demand for instruments. This was also disappointing.

Zacks Rank and Other Key Picks

BD currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Quest Diagnostics Incorporated (DGX - Free Report) and Boston Scientific Corporation (BSX - Free Report) .

Abbott, carrying a Zacks Rank of 2, reported second-quarter 2024 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion outpaced the consensus mark by 0.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Abbott has a long-term estimated growth rate of 8.6%. ABT’s earnings surpassed estimates in three of the trailing four quarters and broke even once, the average surprise being 2.3%.

Quest Diagnostics reported second-quarter 2024 adjusted EPS of $2.35, beating the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion surpassed the Zacks Consensus Estimate by 0.5%. It currently carries a Zacks Rank #2.

Quest Diagnostics has a long-term estimated growth rate of 6.2%. DGX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.3%.

Boston Scientific reported second-quarter 2024 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 6.9%. Revenues of $4.12 billion surpassed the Zacks Consensus Estimate by 2.5%. It currently carries a Zacks Rank #2.

Boston Scientific has a long-term estimated growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.

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