Becton Dickinson & Co. BDX is a $33.87 billion market cap company that provides a broad range of medical devices and diagnostic products used in hospitals, doctors' offices, research labs and other settings.
The med-company is trading at $159.55. Analysts have a consensus $163.53 price target on the stock. Yahoo! YHOO Finance estimates a one-year target share price at $166.9. Also, investors will be paid a dividend of $2.64 at the end of the year. The dividend yield is 1.65%, which tries to protect the purchasing power. Dividend investors often pay attention to the track record of dividends payments and favorable expectations regarding dividend growth for the next year. This company has paid dividends since 1926; during the past 13 years, the highest yield was 2.44%, the lowest was 1.05%, and the median was 1.77%. Now it is close to a five-year low.
After the acquisition of CareFusion CFN, the company doesn't seem to have maximized the synergies, specifically in the operational arena. The reason is simple: There are overlaps between both businesses, and it cannot successfully integrate the purchase. CareFusion's portfolio is complex and works differently.
The company continues with a high presence in emerging markets; more than a quarter of its business is focused on emerging markets. This objective was planned for 2017, but it is already achieved. International operations account for more than half of the company's business.
There is still more room for further expansion in these markets. Of course, commodities prices still represent a growing risk so it is crucial to continue having discipline, principally in operational items. Watching the past, Becton Dickinson historically has been disciplined mainly in its capital allocation strategy.
Moreover, in the diagnostics and bioscience segments, the company continues operating with strong rivals, such as Abbott ABT, which has better marketing, or Roche RHHBY, which has a larger R&D budget.
Joel Greenblatt (Trades, Portfolio) has initiated a new position with 79,016 shares. Moreover, several other gurus have increased their stakes. This was the case of Tom Gayner (Trades, Portfolio), more than doubling his position (+125.00%), T Rowe Price Equity Income Fund (Trades, Portfolio) with a 70.38% increase, Ken Fisher (Trades, Portfolio) also increased his shares by 41.43% and Pioneer Investments (Trades, Portfolio) and First Eagle Investment (Trades, Portfolio) did the same but with no significant changes.
Analysts at Jefferies Group have reiterated bullish ratings on Becton Dickinson; they have reaffirmed "Buy" ratings twice the past month. Further, analysts at Goldman Sachs have raised its price target to $157 from $156.
However, bearish sentiment seems to be stronger among the funds. Richard Pzena (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), George Soros (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) sold out the stock. Ray Dalio (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Jim Simons (Trades, Portfolio) reduced their positions as have Mairs and Power (Trades, Portfolio), Dodge & Cox and Vanguard Health Care Fund (Trades, Portfolio).
Final comment
The company focuses on investments to expand its manufacturing footprint. Although the CareFusion acquisition will not be determinant in emerging markets, it was a promising move, but of course, the challenges remain to integrate the business and generate value from the deal. This is crucial for further growth. The company will be able to obtain those synergies in a couple of years.
For now, we must mention that it is the world's largest manufacturer, and distributor of medical-surgical products and the firm's returns on capital are remarkable. It is true that I will not recommend closing a position in this stock, but it is also true that investors should search for some others options in the near term.
Disclosure: Omar Venerio holds no position in any stocks mentioned.
