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Becton Dickinson – Buy For Its Long-Term Growth Opportunities

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On November 6, 2018 Becton Dickinson (BDX) released Q4 and FY2018 results and provided guidance for FY2019.

BDX is making good progress with the integration of Carefusion and C.R. Bard.

Management is committed to deleveraging the Balance Sheet to below 3x over 3 years and $1.2B of debt was repaid in FY2018 which is slightly ahead of expectations.

I view BDX as currently attractively valued and acquired additional shares on November 5th.

 

Summary

  • Becton Dickinson released its Q4 and FY2018 results and FY2019 Guidance on November 6th.
  • Integration of Carefusion and C.R. Bard is proceeding as planned and management expects strong underlying growth of approximately 16% - 17% on a currency-neutral basis which is in excess of the C.R. Bard deal model.
  • BDX expects to deliver adjusted EPS of $12.05 - $12.15, which represents reported growth of ~10%.
  • Management is committed to deleveraging the Balance Sheet to below 3x over 3 years and $1.2B of debt was repaid in FY2018 which is slightly ahead of expectations.

Introduction

On January 10th, 2018 I wrote an article regarding Becton Dickinson (BDX) entitled ‘Becton Dickinson – Be Aware of the Elevated Risk in this Great Company’. In that article I provided a company overview which included the principal product lines of BDX’s two worldwide business segments: BD Medical and BD Life Sciences, touched upon the C.R. Bard Acquisition, and the competitive landscape.

I followed up that article with another on January 30th after BDX’s Annual Meeting of Shareholders held on January 23.

In both articles I indicated that I was of the opinion that BDX shares were richly valued and that readers should wait for a pullback.

In my January 30th article I analyzed BDX on the basis of a closing stock price of $246.28 on January 26, 2018. If you look at BDX’s one year chart you will see that BDX’s stock price dropped and never recovered to the January 26th level until around mid-July. After mid-July, BDX’s stock price shot up making it even more expensive than when I had looked at it in early 2018.

Subsequent to the beginning of October, BDX’s share price has pulled back nicely and on November 4th I published an article in which I indicated that I had made a decision to liquidate my Philip Morris (PM) shares and to redeploy those funds to acquire additional Becton Dickinson (BDX) shares.

Based on my research I felt BDX’s long-term growth prospects were solid and I strongly suspected the earnings release on November 6th would be positive. On this basis I carried out my trades on November 5th.

The additional BDX shares I acquired are held in an account in which I already own BDX shares (several hundred acquired in February 2009 and more acquired in June 2012); I do not disclose specifics for the account in which these BDX shares are held.

Much to my surprise I noticed that BDX’s market price plunged in pre-market activity on November 6th from the November 5th ~$237 market close. I looked at the earnings release in the early morning and nothing looked out of sorts so I chalked up the price plunge to Mr. Market’s bipolarity.

Fast forward to the November 6th market close and BDX has not only recovered the price plunge but it has closed at $240.69 which is $3.37 higher than the previous business day’s close. BDX’s stock price literally swung ~$14.70 on November 6th!

I have absolutely no clue in which direction a company’s stock price is going to go in the short-term. What transpired with BDX’s stock price reaffirms the need for me to focus on the long-term.

Now that Q4 and FY2018 results and FY2019 projections have been released I thought it would be an opportune time to analyze BDX.

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By |November 6th, 2018|General Investing|Comments Off on Becton Dickinson – Buy For Its Long-Term Growth Opportunities

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