Release Date: August 06, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue of $5 billion grew 4.4% on an FX-neutral basis, exceeding expectations with broad-based growth across the portfolio.
- Key growth platforms delivered strong performance, including double-digit growth in biologic drug delivery, advanced patient monitoring, PureWick, and advanced tissue regeneration.
- Adjusted EPS of $3.23 increased 4.9% year-over-year, beating expectations and leading to a raised full-year EPS guidance midpoint.
- BD Excellence initiatives drove approximately 8% gross productivity in plants, with service levels above 90% and back orders at record lows.
- Free cash flow improved significantly, up 45% year-to-date to $1.7 billion, supporting capital returns and investment in growth.
- Commercial investments are yielding results, contributing 100-150 basis points to APM growth and driving share gains in Alaris and other platforms.
- Innovation pipeline is robust with new product launches like Liverty TIPS Stent Graft and Elyra Thulium Fiber Laser, expanding into high-growth markets.
- BioPharma Systems grew 5.2% despite vaccine headwinds, with strong GLP-1 momentum and approximately 100 signed agreements for novel and biosimilar programs.
- The company raised its full-year revenue growth outlook to the high end of the low single-digit range, reflecting confidence in continued momentum.
- China exposure is reduced to only 4% of New BD revenue, mitigating future market volatility risks.
Negative Points
- Adjusted operating margin declined 130 basis points year-over-year to 24.9%, impacted by tariffs and increased investments.
- Tariffs had an approximately 110 basis point negative impact on margins, with ongoing uncertainty around trade policies.
- Alaris capital sales faced a difficult prior-year comparison, creating a 200 basis point headwind to revenue growth in fiscal 2027.
- Vaccine demand in China remained weak, though stabilizing, with continued pressure on BioPharma Systems growth.
- China market dynamics continue to pose challenges, particularly in Interventional and Medical Essentials segments.
- The company expects a sequential deceleration in Q4 revenue growth due to Alaris comps, with growth slowing to approximately 2.5%.
- Fiscal 2027 revenue growth is expected to be low single-digit, with Alaris remediation end creating a 200 basis point headwind.
- Oil price volatility and resin costs present potential COGS headwinds, requiring proactive pricing actions to offset.
- The company faces a modest EPS leverage outlook for fiscal 2027, with limited margin expansion expected due to Alaris flow-through and investments.
- Management noted a conservative posture for fiscal 2027, with no formal guidance provided yet, creating uncertainty for investors.
Q & A Highlights
Q: The quarter showed strong momentum across many businesses, with 90% of the portfolio delivering high single-digit growth. Was there anything onetime in the results, and how much of this strength carries into fiscal 2027?
A: Tom Polen, Chairman, CEO and President, stated that the growth was broad-based and driven by the company's key growth platforms, which are beginning to pay off as New BD. He highlighted double-digit growth in four platforms, including biologics (specifically GLP-1s), pharmacy robotics (Rowa), and advanced patient monitoring (APM). The company is reallocating a disproportionate amount of R&D into these growth vectors, which not only accelerate revenue but also provide favorable mix benefits to fuel margin expansion.
Q: Given the strength in the quarter, could fiscal 2027 revenue growth be closer to the high end of low single digits? What are the puts and takes for the P&L, and can you grow operating margins next year?
A: CFO Vitor Roque provided the fiscal 2027 framework, reiterating the expectation for low single-digit revenue growth. This is due to the 200 basis point headwind from the Alaris remediation ending in fiscal 2026. He noted that a good starting point for earnings is modest leverage on that revenue baseline, supported by pricing actions, productivity gains from BD Excellence, and capital allocation strategy. Formal guidance will be provided on the November call.
Q: How much of the strong performance is due to changes in the commercial approach versus innovation platforms coming through?
A: CEO Tom Polen explained it is a combination of both. He detailed the "Excellence Unleashed" strategy, which includes appointing the company's first Chief Revenue Officer, changing sales rep compensation, deploying AI tools, and reallocating commercial headcount to high-growth areas. He cited a $35 million incremental investment that grew the APM sales team by 15%, contributing 100 to 150 basis points to APM's growth, and a similar investment in the PI sales team. This is complemented by a shift in the innovation portfolio toward high-growth sectors like connected care and chronic disease treatment.
Q: Can you comment on the broader hospital utilization and CapEx environment, given concerns in the market?
A: CEO Tom Polen stated that BD sees solid utilization across its portfolio, acting as a bellwether for the industry. He cited strong US performance in MDS (up 6%) and specimen management (up 14%), driven by broad underlying utilization and share gains. He noted an internal metric showing an uptick in tube utilization versus needle utilization, indicating more diagnostic testing is being done per patient, which he views as a positive sign for overall health care consumption.
Q: What are the trends and visibility on the 10% of the portfolio that is weighing on growth, specifically Alaris, China, and vaccines?
A: CEO Tom Polen provided updates on the three known headwinds. For vaccines, he sees positive signs of stabilization and does not expect a repeat of the current headwind level in fiscal 2027. For China, he noted it is now a much smaller part of New BD (down to 4% of revenue) and will become less significant. For Alaris, he reiterated that the defined headwind will end in fiscal 2027, after which the company expects to return to its mid-single-digit growth algorithm.
Q: How do you define "modest EPS leverage" for fiscal 2027, and what are the key product drivers over the next 12 to 18 months?
A: CFO Vitor Roque clarified that "modest leverage" is an EPS starting assumption off the low single-digit revenue baseline, reflecting the Alaris flow-through and a dynamic environment. The company plans to offset this with pricing actions, mix favorability, and BD Excellence productivity. CEO Tom Polen highlighted product drivers including continued momentum in APM, new launches in tissue regeneration, pharmacy automation, biologics (with 100 GLP-1 agreements signed), and the Pyxis Pro launch in Connected Care. He also mentioned upcoming innovations to be unveiled at the Investor Day.
Q: The guidance implies a step-down in Q4 growth to about 2.5%. Is that conservatism, and what are the assumptions on inflation and headwinds for next year?
A: CFO Vitor Roque explained the Q4 step-down is due to the Alaris comp dynamics, with the headwind increasing from 100 basis points in Q3 to 200 basis points in Q4. He emphasized the underlying momentum remains strong. CEO Tom Polen addressed the macro environment, noting that resin and molded plastic components represent about 5% of COGS. The company is taking a conservative posture and has already implemented pricing actions to offset potential higher input costs, preferring to assume higher costs and be positively surprised if they improve.
Q: How much more runway is there for productivity enhancement and margin expansion, and is a 30% operating margin by 2030 too ambitious?
A: CEO Tom Polen outlined the multiyear road map for margin expansion, driven by revenue growth, positive mix from growth platforms, and BD Excellence. He noted the company has gone from 50 Kaizens a year to over 2,000, delivering over 500 basis points of margin expansion. He highlighted ongoing opportunities in OEE, material changes, procurement savings, and the application of AI to drive efficiency and cash flow. While he did not provide a specific long-term target, he confirmed an Analyst Day date will be shared soon to discuss long-term targets.
Q: Can you provide more detail on the margin impact from the Alaris capital comp starting in Q4 and through fiscal 2027, and how you plan to offset it?
A: CFO Vitor Roque stated the company has a clear pathway to deliver Q4 margin enhancements sequentially, despite the Alaris revenue decline, due to productivity gains already driven during the year. For fiscal 2027, the Alaris pressure is simply a natural drop-through of lower revenue to the bottom line. The company is actively mitigating this through pricing actions, investments in high-margin growth areas, and BD Excellence productivity, which are factored into the "modest EPS leverage" starting assumption.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
