(BDX) Becton Dickinson Remains Neutral

We reiterate our Neutral recommendation for Becton, Dickinson and Company (BDX). The company reported third-quarter fiscal 2012 earnings per share from continuing operations of $1.52. It thereby missed the Zacks Consensus Estimate of $1.53 per share.

The company stated net income of $326.9 million ($1.59 per share). It includes $15.3 million (7 cents per share) from discontinued operations pertaining to the sell-off of the Discovery Labware unit of BD Biosciences by the end of calendar year 2012.

Becton Dickinson recorded third quarter revenues of $1,981 million, up 1.5% (or 4.9% in constant currency) year over year, missing the Zacks Consensus Estimate of $2,018 million.

On a regional basis, domestic revenues inched up 1.1% year over year to $837 million while overseas revenues moved up 1.7% (or 7.8% in constant currency) to $1,144 million. Overseas sales were driven by sustained growth in emerging nations and robust safety sales.

We remain cautious about Becton Dickinson due to the lack of major short-term catalysts. The rising demand for safety-needle products (with higher price points and margins) was the primary driver of the company’s past growth. The growth rate is, however, not expected to continue, given that the U.S. market is already largely penetrated.

On the positive side, Becton Dickinson’s preeminent global healthcare products franchise is partly insulated from volatile macroeconomic conditions and structural deficiencies elsewhere in the healthcare delivery field.

Becton Dickinson faces a wide range of competitors, including Baxter International (BAX) in certain niches, in each of its three business segments. The stock currently retains a Zacks #4 Rank, which translates into a short-term Sell recommendation.

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