Becton Dickinson & Co.’s shares hit an all-time high of $284.48 in July 2023, but have moved down on weaker demand for its COVID-19 testing kits. However, the company should benefit from stronger demand for its syringes due to increasing use of injectable weight-loss drugs like Ozempic.
Its plan to launch 100 new products should also drive its long-term growth while the balance sheet remains strong and capable of supporting both a dividend and relatively high R&D spending.
The stock trades at 17.8 times the company’s forward earnings forecast.
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BECTON DICKINSON & CO. (New York symbol BDX; www.bd.com) is a major medical device manufacturer.
The company operates through three segments: Medical makes an array of devices for hospitals, doctors’ offices and other clients in health care; Life Sciences sells products for collecting and shipping specimens as well as equipment for detecting diseases; and Interventional makes stents, catheters, needles, incontinence devices and surgical tools.
The U.S. supplies 58% of Becton’s revenue.
The firm has agreed to acquire the Critical Care product group of Edwards Lifesciences Corp. (New York symbol EW) for $4.2 billion. This business makes equipment to monitor the vital signs of patients in hospitals, nursing homes and other healthcare facilities.
The new operations will add roughly $900 million to Becton’s annual revenue of $19.7 billion. As well, Critical Care’s revenue is rising by about 6% to 7% annually. The purchase will also let Becton cross sell its other products to Critical Care’s clients.
Becton will fund this purchase with $1 billion in cash and $3.2 billion in new loans. Even with these new loans, the company’s long-term debt of $18.1 billion (as of June 30, 2024) is a moderate 27% of its market cap.
Growth Stocks: R&D spending fuels new product launches
In its fiscal 2024 third quarter, ended June 30, 2024, Becton’s revenue rose 2.3%, to $4.99 billion from $4.88 billion a year earlier. Thanks to better efficiency and a lower tax rate, earnings improved 18.2%, to $3.50 a share from $2.96.
The company typically earmarks 6% of revenue to the improvement of products and the development of new ones. Under its BD 2025 plan, the company plans to launch over 100 new products by the end of fiscal 2025. It expects those new products will increase its annual revenue by 5.5%. Becton is also dropping its less-profitable products.
For fiscal 2024, the company will probably earn $13.18 a share, and the stock trades at a reasonable 17.8 times that forecast. Becton has also increased the annual dividend rate each year for the past 52 years. The company’s current rate of $3.80 yields 1.6%.
Recommendation in Wall Street Stock Forecaster: Becton Dickinson & Co. is a buy.
