BD (BDX)

Medical technology company Becton, Dickinson and Company (NYSE:BDX) missed Wall Street’s revenue expectations in Q1 CY2025 as sales rose 4.5% year on year to $5.27 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $21.85 billion at the midpoint. Its non-GAAP profit of $3.35 per share was 2.1% 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 $20.93 billion in revenue over the past 12 months, BD has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, BD’s 3.8% annualized revenue growth over the last five years was tepid. This fell short of our benchmark for the healthcare sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. BD’s annualized revenue growth of 5.5% over the last two years is above its five-year trend, but we were still disappointed by the results.

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 5.6% 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’s revenue grew by 4.5% year on year to $5.27 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.8% over the next 12 months, similar to its two-year rate. This projection is above the sector average and implies its newer products and services will fuel better top-line performance.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

BD has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 11.4%, higher than the broader healthcare sector.

Analyzing the trend in its profitability, BD’s operating margin decreased by 1.7 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 1.2 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

In Q1, BD generated an operating profit margin of 10.4%, down 4.2 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

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 unimpressive 4% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

In Q1, BD reported EPS at $3.35, up from $3.17 in the same quarter last year. This print beat analysts’ estimates by 2.1%. Over the next 12 months, Wall Street expects BD’s full-year EPS of $14.09 to grow 6.2%.

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 13.1% over the last five years, better than the broader healthcare sector.

Taking a step back, we can see that BD’s margin dropped by 10.1 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

BD broke even from a free cash flow perspective in Q1. The company’s cash profitability regressed as it was 6.9 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

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 4.4%, 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 $16 million of cash and $19.27 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 $5.67 billion of EBITDA over the last 12 months, we view BD’s 3.4× net-debt-to-EBITDA ratio as safe. We also see its $175 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 revenue missed and its constant currency revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 2.8% to $201.09 immediately following the results.

Updated: July 9, 2025 at 11:47 PM EDT

Before investing in or passing on BD, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

BD isn’t a terrible business, but it doesn’t pass our bar. For starters, its revenue growth was mediocre over the last five years. 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 11.7x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $217.83 on the company (compared to the current share price of $175.50).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.