Becton Dickinson Shares Favorably Valued As It Works To Boost Earnings

Argus believes that shares of Becton Dickinson and Co BDX are favorably valued as it reaffirmed its Buy rating and $185 target price.

Analyst David Toung welcomed the company’s sale of Respiratory Solutions and spinal product businesses, a move that will enable Becton Dickinson to focus on faster growing operations.

Toung is also impressed with the company’s efforts to boost revenue synergies from the CareFusion acquisition, amid strong growth from core businesses. Further, the analyst expects EPS benefit from improving margins, while new product launches should enhance future revenues.

When Becton Dickinson reports its fourth quarter results in early November, the analyst will look for an update on the company’s international sales and contributions from the CareFusion acquisition.

Toung noted that Becton Dickinson generates 45 percent of its sales from overseas markets, which is grappling with currency headwinds and political uncertainty such as Brexit.

“We are looking for signs that these headwinds are abating. We also believe that China will be an important market for BD’s products. Sales in China grew 9.5% in 3Q16, after rising 9.4% in 2Q16,” Toung wrote in a note.

Toung raised his FY 2016 adjusted EPS estimate to $8.57 from $8.54. However, he cut his FY 2017 adjusted estimate to $9.40 from $9.48, which includes projected dilution of $0.10-$0.14 per share from the Respiratory Solutions divestiture.

The company still expects adjusted FY16 EPS of $8.50-$8.57. On a currency-neutral basis, it expects adjusted EPS of $9.08-$9.15, up from a prior view of $9.01-$9.08.

“We believe that BDX shares are favorably valued at 18.2-times our FY17 EPS estimate, in line with the average multiple for our coverage universe of med-tech stocks,” Toung added.

At time of writing, shares of Becton Dickinson were up 0.64 percent to $172.64.