UBS Asks: Time To Buy Becton Dickinson?

In a report published Monday, UBS analyst Jonathan Groberg upgraded the rating on Becton, Dickinson and Co. BDX from Neutral to Buy, while raising the price target from $159 to $167.

In the report UBS noted that there were “a number of under-appreciated catalysts” that could boost Becton’s shares higher, including:

• Reduced estimates and “minimal divestiture dilution risk” – On account of the respiratory product recall, decelerating EM growth, and currency headwinds, the pro-forma EPS estimates have been reduced, triggering a decline in the company’s share price.

“However, we believe BDX is well positioned to deliver on these reset expectations, and likely exceed them. We calculate that there is little risk of dilution from further divestitures as proceed-driven buybacks should be able to offset lost net income,” analyst Jonathan Groberg said.

• Becton’s new product pipeline appears “under-appreciated” – Investors seem to be overlooking “the potential of key new product introductions like the diabetes infusion set, which we estimate could add $200-250m in annual revenues,” Groberg wrote.
• Upside to Becton’s stated accretion goals – “Glassdoor data powered by our Evidence Lab team, early CFN integration milestones, and realistic synergy targets suggest upside to BDX's stated accretion goals”

The EPS estimates for FY15, FY16 and FY17 have been raised from $7.07 to $7.08, from $8.47 to $8.52 and from $9.38 to $9.51, respectively, to reflect the outlook for the diabetes infusion set.