BD (BDX)

Medical technology company Becton, Dickinson and Company (NYSE:BDX) met Wall Streets revenue expectations in Q3 CY2025, with sales up 8.3% year on year to $5.89 billion. Its non-GAAP profit of $3.96 per share was 1.2% above analysts’ consensus estimates.

Company Overview

With a history dating back to 1897 and a presence in virtually every hospital around the globe, Becton Dickinson (NYSE:BDX) develops and manufactures medical supplies, devices, laboratory equipment and diagnostic products used by healthcare institutions and professionals worldwide.

The surgical equipment and consumables industry provides tools, devices, and disposable products essential for surgeries and medical procedures. These companies therefore benefit from relatively consistent demand, driven by the ongoing need for medical interventions, recurring revenue from consumables, and long-term contracts with hospitals and healthcare providers. However, the high costs of R&D and regulatory compliance, coupled with intense competition and pricing pressures from cost-conscious customers, can constrain profitability. Over the next few years, tailwinds include aging populations, which tend to need surgical interventions at higher rates. The increasing integration of AI and robotics into surgical procedures could also create opportunities for differentiation and innovation. However, the industry faces headwinds including potential supply chain vulnerabilities, evolving regulatory requirements, and more widespread efforts to make healthcare less costly.

Becton Dickinson competes with other medical technology companies including Medtronic (NYSE:MDT), Abbott Laboratories (NYSE:ABT), Baxter International (NYSE:BAX), and Thermo Fisher Scientific (NYSE:TMO) across its various business segments.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $21.84 billion in revenue over the past 12 months, BD sports economies of scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, BD grew its sales at a mediocre 5.7% compounded annual growth rate. This was below our standard for the healthcare sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. BD’s annualized revenue growth of 6.2% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

BD also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 6.3% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that BD has properly hedged its foreign currency exposure.

This quarter, BD grew its revenue by 8.3% year on year, and its $5.89 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.4% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.

BD has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 12%, higher than the broader healthcare sector.

Looking at the trend in its profitability, BD’s operating margin decreased by 1.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, BD generated an operating margin profit margin of 11.8%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

BD’s solid 7.2% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

In Q3, BD reported adjusted EPS of $3.96, up from $3.81 in the same quarter last year. This print beat analysts’ estimates by 1.2%. Over the next 12 months, Wall Street expects BD’s full-year EPS of $14.42 to grow 2.3%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

BD has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 12.9% over the last five years, better than the broader healthcare sector.

Taking a step back, we can see that BD’s margin dropped by 5.6 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

BD’s free cash flow clocked in at $1.00 billion in Q3, equivalent to a 17% margin. This cash profitability was in line with the comparable period last year and above its five-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

BD historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.7%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, BD’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

BD reported $859 million of cash and $19.18 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $6.07 billion of EBITDA over the last 12 months, we view BD’s 3.0× net-debt-to-EBITDA ratio as safe. We also see its $275 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its constant currency revenue slightly missed and its revenue was in line with Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 3.4% to $170.33 immediately following the results.

Updated: December 4, 2025 at 11:01 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in BD.

BD isn’t a terrible business, but it doesn’t pass our bar. To kick things off, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its strong operating margins show it’s a well-run business, the downside is its cash profitability fell over the last five years. On top of that, its mediocre ROIC lags the market and is a headwind for its stock price.

BD’s P/E ratio based on the next 12 months is 13x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $202.58 on the company (compared to the current share price of $193.25).