Why Leerink Is Upping Its Becton-Dickinson Target To $158

In a report published Friday, Leerink Partners analysts maintained a Market Perform rating on

, while raising the price target from $150 to $158, following the recent meeting with CEO Vincent Forlenza, CFO Chris Reidy and BD Medical Segment President Tom Polen at the company's headquarters in New Jersey. In the report Leerink Partners noted, "Mgmt highlighted a positive outlook for the just-closed CFN deal, longer term rev. synergy potential and a stable-to-improving utilization/pricing environment. In all, we come away more constructive on BDX and the CFN combo, which looks set to sustain DD EPS growth." The CFN transaction closed on March 17. The analysts believe that the "strategic rationale" continues to "make sense." Becton, Dickinson and Co highlighted the benefits of the combo including: "(1) a stronger end-to-end medication management solution, (2) longer-term emerging markets (EM) synergies & margin expansion potential (that CFN otherwise would have had trouble capturing), and (3) enhanced relevance to hospitals through planned and existing "smart" product platforms (i.e., Alaris, Pyxis) that can help hospitals better leverage/capitalize on hospital IT infrastructure investments and drive efficiency/cost savings." The company may enjoy cost synergies much earlier than revenue synergies. The management expects $250M in savings by year three, accruing from G&A in the near term and from op. improvements in the long term. Becton, Dickinson and Co may face currency headwinds due to its EM exposure. The analysts noted, however, that the company's "EM footprint continues to expand and represents a significant growth engine going forward." The EPS estimates for 2015 and 2016 have been raised from $6.57 to $7.26 and from $6.98 to $8.56, respectively, reflecting higher the CFN accretion.