Becton Dickinson’s shares are up 9.4% in the past year, despite falling demand for its COVID-19 testing kits as the pandemic eases. At the same time, the company continues to launch new products and this should fuel its growth for many years to come.
The firm continues to see rising revenue and earnings when taking spinoffs and acquisitions into account.
Meanwhile the stock trades at 21.8 times the company’s 2023 earnings forecast.
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BECTON DICKINSON & CO. (New York symbol BDX; www.bd.com) makes a variety of medical devices, including stents, catheters, needles, incontinence devices and surgical tools.
Becton often uses acquisitions to enhance its expertise. For example, it paid $25 billion for medical device maker C.R. Bard in February 2018. More recently, it purchased Parata Systems, a maker of robotic equipment for pharmacies and hospitals, for $1.55 billion.
Thanks to those new businesses, Becton’s overall revenue rose 8.2%, from $15.98 billion in 2018 to $17.29 billion in 2019 (fiscal years end September 30). Revenue then fell 1.0% to $17.12 billion in 2020 due to unfavourable exchange rates. In 2021, revenue rebounded 18.3% to $20.25 billion on strong demand for its COVID-19 testing kits.
In April 2022, Becton spun off its diabetes products business as a separate firm called embecta Corp. (New York symbol EMBC). Investors received one embecta share for every five Becton shares they held. Due to the spinoff, revenue fell 6.8% to $18.87 billion in 2022. Revenue on a comparable basis declined 1.4% as demand for COVID-19 products weakened.
In its fiscal 2023 third quarter, ended June 30, 2023, Becton’s revenue rose 5.1%, to $4.88 billion from $4.64 billion a year earlier. If you factor out declining demand for COVID-related products and currency rates, revenue improved 6.7%. Earnings rose 11.3%, to $2.96 a share from $2.66. Factoring out exchange rates, per-share earnings gained 15.0%.
Growth Stocks: 100 new products are on the way to boost Becton Dickinson’s revenue and earnings
Becton typically spends about 6% of its revenue on developing new products and improving existing ones.
Earlier this year, the company received approval from the U.S. Food and Drug Administration for its new BD Kiestra MRSA imaging device. It uses artificial intelligence software to analyze blood and other samples for MRSA (methicillin-resistant staphylococcus aureus), a type of bacteria that is resistant to antibiotics.
This new product requires minimal human interaction. That will speed up the testing process compared to the traditional method of examining Petri dishes.
In all, Becton plans to launch over 100 new products by the end of 2025.
Those new products should help lift Becton’s earnings by about 8% in the fiscal year ending September 30, 2023, to $12.20 a share. The stock trades at a reasonable 21.8 times that forecast. The company has also increased the annual dividend rate each of the past 51 years. The current rate of $3.64 yields 1.4%.
Recommendation in Wall Street Stock Forecaster: Becton Dickinson & Co. is a buy.