Analyst recommendations for BD
Based on recommendations of 20 broker firms in a Bloomberg survey, 55% or 11 of them gave Becton Dickinson (or BD) (BDX) a consensus rating of “buy.” BD was rated “hold” by 45% or nine of the analysts. None of the firms rated the company a “sell.” These ratings were despite registering lower-than-expected revenues in 1Q16 and a conservative revenue guidance for fiscal 2016.
Mostly positive ratings
The table above lists the 14 brokerage firms that provided a target price for BD for the next 12 months. The consensus 12-month target price was $165.10, amounting to a 19.7% return. This compares to BD’s price of $137.91 on February 4, 2016.
During 1Q16, BD registered strong operational earnings and revenue growth but registered lower-than-expected reported revenues. A number of factors contributed to lower reported revenues, raised earnings guidance, and reduced revenue guidance for 2016. These factors include the following:
- lower oil prices that impacted raw material prices
- the sale of BD Rx, the prefilled injectables division, to Fresenius Kabi, a leading European healthcare company with global operations and specialization in the field of nutrition therapies and infusion
- reinstatement of the R&D (research and development) tax credit
- suspension of the medical device tax
- low flu season
- continued negative impact of currency headwinds
These factors are expected to have further implications on the company’s financials for the rest of 2016.
Peers Medtronic (MDT), Johnson & Johnson (JNJ), and Boston Scientific (BSX) have average broker target prices of $87.50, $108.70, and $21.20, respectively. These figures imply returns of 18.4%, 6.3%, and 25.3%, respectively, in the next 12 months.
ETFs with exposure to BD
Investors can get exposure to BD by investing in the Health Care Select Sector SPDR ETF (XLV), which has 1.2% of its total holdings in BD. One of the major dividend ETFs, the Vanguard Dividend Appreciation ETF (VIG), tracks the NASDAQ US Dividend Achievers Select Index. BD accounts for about 0.67% of VIG’s total holdings. Investors can also gain exposure to BD through the SPDR S&P 500 ETF (SPY), which has 0.17% of its total holdings in BD.