Can Sustained Product Demand Drive BDX Stock Before Q3 Earnings?

Becton Dickinson and Company BDX, popularly known as BD, is scheduled to report third-quarter fiscal 2025 results on Aug. 7, before market open.

In the last reported quarter, the company’s earnings per share (EPS) of $3.35 surpassed the Zacks Consensus Estimate by 2.1%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, delivering an earnings surprise of 6%, on average.

Let’s check out the factors that have shaped BDX’s performance prior to this announcement.

Factors to Note Before BDX Reports

BD Medical

During the last reported quarter, management confirmed that the segment’s Advanced Patient Monitoring business unit launched its next-generation hemodynamic monitoring solution, HemoSphere Alta Advanced Monitoring Platform. This is expected to provide clinicians with AI-driven clinical decision support. This looks very promising for the stock as wider product adoption is likely to significantly aid the segmental revenues in the third quarter of fiscal 2025.

On second-quarter fiscal 2025 earnings call in May, management shared a few updates about the BD Medical segment. Per management, the company continued to progress its Connected Care strategy and received the next 510(k) clearance for BD Alaris enhancements, including cybersecurity updates and clearance of the EtCO2 module. The company also launched BD neXus, its next-generation infusion pump designed for the Europe, the Middle East and Africa region. This looks promising for the stock.

The Zacks model estimates the BD Medical segment’s revenues in the fiscal third quarter to be $3.01 billion, up 17.7% year over year.

BD Life Sciences

In May, BDX announced the global commercial launch of BD FACSDiscover A8 Cell Analyzer, featuring breakthrough spectral and real-time cell imaging technologies. This is expected to enable more researchers across a wider range of applications to uncover deeper insights and dynamics from cells once invisible in flow cytometry experiments with increased ease and throughput. This is likely to have witnessed encouraging product adoption during the to-be-reported quarter, thereby driving the segmental revenues.

On the fiscal second-quarter earnings call, management confirmed that the fiscal second-quarter performance was below BD’s expectations. This was largely attributable to market dynamics concentrated in Life Sciences, which reflected the change in research funding policy against what was initially anticipated, and the slower rate of return to normal levels of blood culture testing in the Diagnostics business. This raises our apprehension about the company’s performance in the to-be-reported quarter.

The Zacks model estimates the BD Life Sciences segment’s revenues in the fiscal third quarter to be $1.21 billion, down 4.2% year over year.

BD Interventional

In May, BD announced the receipt of the FDA’s 510(k) clearance and the commercial launch of Phasix ST Umbilical Hernia Patch. Per management, it is the first and only fully absorbable hernia patch currently on the market designed specifically for umbilical hernias.

We also expect the robust adoption of BD’s products to have continued in the third quarter of fiscal 2025, driven by sustained demand, thereby significantly pushing up segmental revenues.

The Zacks model estimates the BD Interventional segment’s revenues in the fiscal third quarter to be $1.28 billion, up 2.9% year over year.

BD’s Estimate Picture

For third-quarter fiscal 2025, the Zacks Consensus Estimate for revenues is pegged at $5.48 billion, implying an improvement of 9.9% from the prior-year quarter’s reported figure.

The consensus estimate for EPS is pegged at $3.42, indicating a decrease of 2.3% from the prior-year period’s reported number.

What Our Model Suggests About BDX

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold), along with a positive Earnings ESP, has higher chances of beating estimates. This is not the case here, as you can see below.

Earnings ESP: BD has an Earnings ESP of -0.40%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Becton, Dickinson and Company Price and EPS Surprise

Becton, Dickinson and Company price-eps-surprise | Becton, Dickinson and Company Quote

BD’s Share Price Performance

Over the past three months, BD’s shares have risen 8.3%, outperforming the Medical - Dental Supplies’ 1.6% gain. BDX’s shares also outperformed the Zacks Medical sector’s decrease of 0.3%, but underperformed the S&P 500’s growth of 13.3%.

Three Months Price Comparison

BD’s peers like Cardinal Health, Inc. CAH, McKesson Corporation MCK and The Cooper Companies, Inc. COO have all underperformed the company. CAH, MCK and COO’s shares are up 5%, up 0.1% and down 13%, respectively, in the same time frame.

BD’s Key Valuation Metric

From a valuation standpoint, BDX’s forward 12-month price-to-earnings (P/E) is 12.3X, a discount to the industry's average of 16.2X.

The company is trading at a discount to its peers, Cardinal Health, McKesson and Cooper Companies. Cardinal Health, McKesson and Cooper Companies’ P/E currently stand at 17X, 18.3X and 16.4X, respectively.

This suggests that investors may be paying a lower price relative to the company's expected sales growth.

BDX’s Long-Term Investment Visibility

This month, BD announced its plans to invest more than $35 million and expand prefilled flush syringe manufacturing at its Columbus, NE, facility. The investments will likely support new BD PosiFlush Prefilled Flush Syringe production lines, product innovation and operational efficiencies, enabling BD to produce hundreds of millions of additional units annually to meet growing demand from U.S. hospitals and health systems.

Last month, BD announced that it has submitted an application to the FDA for a new, at-home human papillomavirus (HPV) test that enables patients to self-collect a sample in the comfort of their home, simplifying processing at the lab and reporting more high-risk strains of HPV. The same month, BDX announced the receipt of the FDA’s 510(k) clearance for the BD Veritor System for SARS-CoV-2, a digital test designed to detect COVID-19 antigens in symptomatic individuals in a few minutes at doctors' offices, urgent care centers, retail clinics and other convenient points of care. These raise our optimism about BD’s continued efforts to strengthen its product portfolio.

Also, in July, BD announced a definitive agreement with Waters Corporation to combine its Biosciences & Diagnostic Solutions business with Waters. Per BD’s management, the agreement will likely bring together complementary portfolios and channels that create an industry-leading life science and diagnostics company. This looks promising for BD as it is expected to enhance its strategic focus as a medical technology company.

For fiscal 2025, management is optimistic about witnessing increasing momentum from BD Excellence. This will likely drive significant margin expansion and enable the delivery of strong adjusted EPS growth.

However, BD’s strong performance in the fiscal second quarter was partially offset by continued market dynamics in China. The current unstable macroeconomic business environment, continued inflationary pressures, and labor dynamics are likely to have weighed on the company’s fiscal third-quarter revenues, raising our apprehension.

Our Final Take on BD

There is no denying that BD sits favorably in terms of core business strength, earnings prowess, robust financial footing and global opportunities. The stock’s strong core growth prospects are a good reason for existing investors to retain shares for potential future gains.

For those exploring to make new additions to their portfolios, the valuation indicates expectations of superior performance compared with its industry and sector peers. As it is still valued lower than the broader market, it suggests potential room for growth if it can align more closely with overall market performance. As the chances of beating estimates are unlikely, it would be unwise to add the stock to one’s portfolio before the earnings. However, if investors are already holding the stock, it would be prudent to hold on to it at present.

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This article originally published on Zacks Investment Research (zacks.com).

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