Becton, Dickinson (NYSE: BDX) reported results from its first fiscal quarter, but all eyes were on the rest of the fiscal year that will include contributions from the recently closed acquisition of C.R. Bard.
Becton, Dickinson results: The raw numbers
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What happened with Becton, Dickinson this quarter?
- Revenue from the medical segment increased 1.9% year over year. While medication and procedural solutions grew 5% on the back of pre-filled flush devices, infection prevention, and surgical products and pharmaceutical systems revenue grew 3.7%, the division was hurt by the medication management solutions division that fell 3.4% year over year as it continues to be affected by the company's previously announced decision to change its U.S. dispensing business. Rounding out the group, revenue from diabetes care was up 2.2% with pen needles driving the growth.
- In the life sciences segment, revenue increased 7.3% thanks to a 12.5% jump in diagnostic systems revenue. An early flu season helped boost the year-over-year comparison, but the diagnostic systems division is also benefiting from growth of its BD MAX molecular platform and Kiestra specimen processors. Preanalytical systems and biosciences were up 4% and 5.3%, respectively, which brought the segment's revenue down, but were basically in line with the company's overall growth.
- Gross margins improved, but the company spent a little more on selling and administrative expenses and boosted its investment in research and development, resulting in a slight decrease in adjusted operating margins.
- The GAAP numbers include costs associated with acquisitions and tax expense associated with the new U.S. tax legislation as well as a one-time benefit from an antitrust ruling in the year-ago quarter, so looking at adjusted EPS is the best way to make a year-over-year comparison.
What management had to say
Becton, Dickinson is looking for cost synergies of $300 million from the Bard acquisition as it exits 2020 with $70 million to $80 million coming this fiscal year as Chief Financial Officer Christopher Reidy laid out:
In addition to the cost savings, there's also potential to increase sales from cross-selling of the companies' products as Thomas Polen, president of the company's medical segment, highlighted:
Polen is aware of the potential clash of cultures, so it's going through the integration in a thoughtful way:
Revenue is expected to increase 30% to 31% this fiscal year thanks to the contribution of Bard, which isn't a very useful number. Fortunately, management also provided comparisons as if the company owned Bard last fiscal year, guiding for revenue growth of 4.5% to 5.5% on a currency-neutral basis.
As discussed, the synergies will help operating margins improve, leading to adjusted earnings-per-share growth that will substantially outpace revenue growth of the combined companies. Management guided for adjusted earnings of $10.85 to $11 per share, an increase of 15% to 16% over last fiscal year, or about 12% when measured on a currency-neutral basis.
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