Can Becton, Dickinson (BDX) Keep the Earnings Streak Alive? - Analyst Blog

Becton, Dickinson and Company BDX is set to report its second-quarter fiscal 2014 earnings results on May 1, 2014. In the last reported quarter, the company had posted a 10.08% positive surprise. Let's see how things are shaping up for this announcement.

Factors at Play

In the last reported fiscal 2014-first-quarter, Becton, Dickinson reported adjusted earnings of $1.42 per share, beating the Zacks Consensus Estimate by 13 cents and the prior-year earnings per share by 11.9%. In fact, the company has delivered positive surprises in all of its last 4 quarters, with an average beat of 7.93%.  

In the last reported quarter, Becton, Dickinson's revenues increased 6.7% year over year to $2,015 million. The improvement in the top line was the primary driving force behind the company's better-than-expected earnings growth. Yet, at the same time, the company experienced negative gross margin due to impacts from currency, raw materials and startup costs.

Segment wise, Becton, Dickinson delivered growth in all of its three segments in the quarter, with strong growth particularly in Medical and continued improvements in Biosciences.

For fiscal 2014, Becton, Dickinson continues to expect revenue growth in the range of 4.0 to 5.0%, both in reported and constant currency. The company also anticipates adjusted earnings per share between $6.19 and $6.22 for the year (compared with the prior range of $6.16 to $6.22), reflecting year-over-year growth of 6.5–7.0% over fiscal 2013. The current Zacks Consensus Estimate of $6.23 lies above the guided range.

In constant currency, management expects adjusted earnings per share to increase 9.5–10% in fiscal 2014, excluding the incremental impact of the medical device tax.

Earnings Whispers?

Our proven model does not conclusively show that Becton, Dickinson is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  Becton, Dickinson has a negative Zacks ESP. That is because the Most Accurate estimate stands at $1.49 while the Zacks Consensus Estimate is higher at $1.50. That leads to a difference of -0.67%.

Zacks Rank: Becton, Dickinson's Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Myriad Genetics Inc. MYGN, earnings ESP of +10.87% and a Zacks Rank #1 (Strong Buy).

Affymetrix, Inc. AFFX, earnings ESP of +50.00% and a Zacks Rank #2 (Buy).

Cardinal Health, Inc. CAH, earnings ESP of +1.00% and Zacks Rank #2 (Buy).