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BD’s Diversified Geographic Footprints: What Will Drive Growth?

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BD’s geographic profile and performance

Becton Dickinson (BDX) has a diversified presence around the world. The company’s sales contribution in 2016 from the United States, however, rose to 55% from around 50% in 2015 due to the slowdown in emerging markets. But the emerging markets are BD’s high growth markets where China witnessed double-digit growth in the recent quarter. The below diagram shows the company’s global footprints.

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Global opportunities

The emerging markets present an immense untapped opportunity for BD. In 2016, around 15% of the total revenues were generated from emerging markets, and the rest came from developed markets. Thus, the company can leverage its diversified footprints and expand its product base across these geographies. The comparable currency-neutral YoY (year-over-year) sales growth in developed markets was ~4.1%, whereas the company registered 5.3% YoY sales growth in its emerging markets business in fiscal 2016. China reported full-year YoY growth of around 10.1% boosted by double-digit growth of ~17.7% in 4Q16. The Middle East and Africa, however, reported some headwinds, thus pulling down the emerging markets sales.

In Saudi Arabia, the government’s expenses cut of around 35% impacted BD’s sales in the region. However, the company has already started experiencing stabilization in Saudi Arabia, and the headwinds in Africa are expected to end by 1Q17.

China sales were weak in 1Q16 but registered strong growth for the rest of the year, especially in the BD Medical segment. The company expects to witness strong growth in China’s Lifesciences segment sales as well in the year ahead.

Some of the other companies in the US medical device industry with strong footprints in the emerging markets include Medtronic (MDT), Abbott Laboratories (ABT), and Zimmer Biomet Holdings (ZBH). The iShares Edge MSCI Min Vol USA ETF (USMV) invests ~1.5% of its holdings in BD.

Next, let’s discuss how the portfolio optimization strategy is driving BD’s growth.

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