Can Sustained Product Demand Drive BDX Stock Before Q2 Earnings?

Becton Dickinson and Company BDX, popularly known as BD, is scheduled to report second-quarter fiscal 2025 results on May 1, before market open.

In the last reported quarter, the company’s earnings per share (EPS) of $3.43 surpassed the Zacks Consensus Estimate by 15.1%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, delivering an earnings surprise of 7.3%, on average. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

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 Carilion Clinic became the first health system in Virginia to offer needle-free inpatient blood draws using the BD PIVO Pro Needle-free Blood Collection Device. This looks very promising for the stock as wider product adoption is likely to significantly aid the segmental revenues in the second quarter of fiscal 2025.

On the first quarter of fiscal 2025 earnings call in February, management shared a few updates about the BD Medical segment. Per management, the company continued to progress its Connected Care strategy and submitted the next 510(k) for the BD Alaris Infusion System (that enables over-the-air software updates and includes a new EtCO2 module) as planned. BD also continued to make progress in the Advanced Patient Monitoring business unit, where it received the FDA's 510(k) clearance on the next-generation HemoSphere Alta Monitor and the new Swan IQ and ForeSight IQ smart sensors. This looks promising for the stock.

The Zacks model estimates the BD Medical segment’s revenues in the fiscal second quarter to be $2.85 billion, up 16.3% year over year.

BD Life Sciences

During the fiscal first quarter, the segment’s Specimen Management business unit announced an expansion of fingertip blood testing for use by U.S. health systems and other large provider networks in settings like urgent cares, doctor offices and other ambulatory care settings. This is also likely to have witnessed continued product adoption during the to-be-reported quarter, thereby driving the segmental revenues.

On the first quarter fiscal 2025 earnings call, management confirmed that in the molecular diagnostics portfolio, BD is continuing to advance its position in the $2 billion high-volume molecular testing market. The FDA-approved BD Onclarity HPV Assay is currently witnessing accelerating sales funnel momentum on the back of recent changes in U.S. cervical cancer screening guidelines and increased U.S. reimbursement. This is likely to have continued to aid BD’s revenues in the fiscal second quarter.

The Zacks model estimates the BD Life Sciences segment’s revenues in the fiscal second quarter to be $1.29 billion, down 1.3% year over year.

Becton, Dickinson and Company Price and EPS Surprise

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

BD Interventional

On the fiscal first-quarter earnings call, management stated that the BD Interventional segment continued to advance its strategy in advanced tissue regeneration and expand into new applications. BD also received the European Union’s approval for the prevention of incisional hernias using the Phasix resorbable mesh, while the U.S. trial remains underway. BD also enrolled the first patients in its GalaFLEX capsular contraction prevention clinical trial.

We also expect the robust adoption of BD’s products to have continued in the second 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 second quarter to be $1.33 billion, up 2.8% year over year.

BD’s Estimate Picture

For second-quarter fiscal 2025, the Zacks Consensus Estimate for revenues is pegged at $5.37 billion, implying an improvement of 6.4% from the prior-year quarter’s reported figure.

The consensus estimate for EPS is pegged at $3.28, indicating an increase of 3.5% 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 0.00%. 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 #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

BD’s Share Price Performance

Over the past three months, BD’s shares have lost 16.3%, underperforming the Medical - Dental Supplies’ 7.3% decline. BDX’s shares also underperformed the Zacks Medical sector and the S&P 500’s decreases of 7.9% and 8.9%, respectively.

Three Months Price Comparison

BD’s peers like Cardinal Health, Inc. CAH and Merit Medical Systems, Inc. MMSI have outperformed the company, while Henry Schein, Inc. HSIC underperformed the company. CAH and MMSI’s shares are up 7.9% and down 12.7%, respectively, while HSIC shares are down 17.6% 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 13.6X, a discount to the industry's average of 16.6X.

The company is trading at a discount to its peers, Cardinal Health and Merit Medical. However, BD is trading at a premium to its other peer, Henry Schein. Cardinal Health and Merit Medical’s P/E currently stand at 15.6X and 26X, respectively, while the ratio for Henry Schein stands at 13.1X.

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

BDX's Long-Term Investment Visibility

During the last reported quarter, management made additional investments in its U.S. manufacturing network to add capacity for critical medical devices, including syringes, needles and IV catheters, to meet the ongoing needs of the nation's healthcare system. This is likely to significantly boost BD’s Medication Delivery Solutions business unit of the broader BD Medical segment in the long term.

Another notable development during the fiscal first quarter that looks promising for BD’s Life Sciences segment is its Biosciences business unit’s collaboration with Biosero to enable robotic integration with BD flow cytometers to accelerate drug discovery and development. Together, the companies intend to develop new software capabilities within BD flow cytometer instrument software to be compatible with Biosero's Green Button Go software, as well as jointly support biopharmaceutical and contract research organizations with their custom research needs, to enable easy integration with robotic arms. On the first quarter of fiscal 2025 earnings call, management confirmed that BD continued to advance its cycle of innovation and remains on track to launch the first BD FACSDiscover Analyzer, the A8, in the second half of fiscal 2025. These are likely to aid BD’s product portfolio during fiscal 2025.

Another notable launch that is expected to drive BD’s results in fiscal 2025 and beyond includes the HemoSphere Alta advanced monitoring platform with predictive, smart algorithms in April. Management also commented on the fiscal first-quarter earnings call that BioPharma Systems is uniquely positioned to enable the transition to biologics, including GLP-1 treatments, and capitalize on the large growth potential of pharmaceutical industry trends as more drug launches rely on patient self-injection.

In February, the company announced its plan to separate its Biosciences and Diagnostic Solutions business from the rest of BD to enhance strategic focus and growth-oriented investments and capital allocation for both BD and the separated business and enhance value creation for shareholders. This looks promising for the stock’s prospects in the long term.

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 first quarter was partially offset by continued transitory market dynamics that resulted in lower demand for research solutions in China and the United States. The current unstable macroeconomic business environment, continued inflationary pressures, and labor dynamics are likely to have weighed on the company’s fiscal second-quarter revenues, raising our apprehension.

Our Final Take

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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