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Morningstar | Becton, Dickinson Delivers Solid 4Q Results; 2019 Guidance Affected by Tariffs and Raw Materials

Becton, Dickinson reported strong fiscal fourth-quarter results, with revenue up 8.4% on a currency-neutral basis, ahead of our expectations. The company's 2019 guidance was slightly weaker than anticipated, however, which BD attributed largely to macro headwinds, including tariffs. We're likely to slightly raise our fair value estimate to account for cash flows realized since our last update; the shares appear fairly valued at current levels. Our narrow moat rating is unchanged.

All areas in the medical segment delivered good results, particularly the medication management solutions business, which grew an impressive 21% in the quarter, albeit aided somewhat by order timing on the pumps side. BD targets to launch its next update to the Pyxis ES platform in 2019, which should support the reaccelerated growth in dispensing. Medication delivery solutions is delivering results above our targets, supporting the new normalized growth in this segment of about 6%, roughly 100 basis points higher than our previous forecasts here. Other segments were largely in line with our estimates. By geography, the U.S. market delivered the best quarter of the year, up 9%. Emerging markets were up 11.8% organically in the quarter, with China still growing strongly (13.6%) despite difficult comps.

BD's 2019 guidance was somewhat conservative as the company is taking a cautious approach to the macro environment. Tariffs are expected to have an impact on the business on the top line, while raw materials (resin in particular) will provide a headwind on the earnings line. Nonetheless, the guidance isn't too far off our forecast, so we aren't making material changes to our model. BD quantified the Bard revenue synergies; $250 million by 2022 is higher than what the company got out of Carefusion but largely anticipated by investors.